Stock Market Analysis

Sunday, June 05, 2011

Intermediate Correction Starts?

The Dow continued to slide into what is shaping up to be that overdue intermediate pullback I have been talking about for so long.

The Dow retreated 251 points last week, sending the Dow back down to its weekly 30MA (30WMA). The Dow's weekly 30MA has always been its intermediate trend support. Closing below the 30WMA on a week on week basis almost always promise more downside to come. The Dow is currently right on top of the line in the same fashion the short term pullback in March did. However, having two such strong pullbacks within such a short period of time always spell trouble and may lead on to something bigger. Yes, that overdue intermediate pullback I have been talking about.

The Dow retreated almost 1400 points in the last intermediate correction back in May 2010 before it rebounded to new highs. Since then, the market have not seen a correction of that magnitude even though it is still in the recovery phase and economic data tend to soften from time to time. As such, this could be it before the market can move on healthily to new highs.
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