Stock Market Analysis

Sunday, June 12, 2011

Volatile Week Ahead...

The Dow sunk 172 points last week as the intermediate correction went underway.

It was another week of pain last week as the US market continued to landslide and investors continued to move back into bonds, depressing bond yields whole week. Yes, this is the intermediate correction I was talking about since last month and so far, it has been strong and committed as economic data continue to support to downside.

The Dow is now right on its weekly 30MA, which is an important intermediate support. Breaking this level would set the Dow into an intermediate neutral trend just like what we saw back in May 2010. In fact, a retest of the weekly 50MA at about 11,470 would be the most realistic target for this intermediate correction. As such, I would be careful of any apparent "strength" in the market until that level is reached.

This is the third week of June. The third weeks of any month are commonly volatile weeks with the release of important leading indicators as well as options expiration on Friday. More than that, the coming Friday is "Quadruple Witching" day, when a bunch of derivatives would expire, leading to more volatility than usual (see Stock Market Calendar). As such, I continue to expect a volatile bearish inclined week ahead even though the market might go sideways or even slightly upwards a bit due to the strong down day last Friday. Beware of bull traps.
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