Turn Around Imminent

The Dow continued into its 6th down day last Friday, closing the week lower by 537 points or 4.2%, governed largely by fears surrounding the US debt issue.

Indeed, last Friday's GDP and Chicago PMI did nothing to help the already negative sentiment in the market as both data turned in poorer than expected. Overall, economic data continue to be shaky along with the US debt issue, creating the perfect bearish atmosphere for the market. In fact, bond yields ditched strongly across the board as investors rushed back into the safety of bonds and options traders pushed the total equities put call ratio all the way up to 1.2 in favor of put options trading in a sudden surge. VIX also jumped 6.36% last Friday. However, everytime such a sudden change in all three indicators happen on a single day, it usually means a blow off day and that the trend might just turn around the very next trading day.

Indeed, on the technical front, the Dow also made a strong blow off day with volume surge and a bottom side hammer formation last Friday. This, together with all 3 of the above mentioned indicators displaying blow off behavior and the fact that the market is already down 6 straight days, we could see a turn around as soon as Monday itself. As I have mentioned last week, the Dow is now in a volatile sideways trend within a 12750 and 12000 channel. In fact, the 12000 support is reinforced by the 200MA itself as well. So there is no doubt a short term bottom is here.

For now, the Dow remains in a short term bear trend within an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Exhaustion Sell-off?

The Dow sold off strongly by 198 points today as debt talks failed to make progress and economic data continue to turn in worse than expected.

Fundamentals
US market opened negative and sold off right off the gate as Durable Goods Orders disappointed by a mile. This is compounded by the disappointing Beige Book report showing slowing economic growth. By the muted response on the bond yields curve and the huge surge in total equities put call ratio, it does seems like today's sell off came mainly from traders and not institutional investors. This is the 4th straight down day in the US market and the Dow has lost a total of 421 points so far. Lets see if tomorrow's Jobless Claims can surprise positively and stall this freefall. Analysts are expecting a worse number this week so anything just slightly higher than last week would amount to a positive surprise... shouldn't be a hard thing to do.

Technicals
The Dow revisited its 30MA as I have expected in yesterday's email to paid subscribers. However, what was surprising was that it actually broke and closed below both the 30MA and 50MA. Good thing is that it didn't close low enough to constitute a significant downside breakout of both critical short term support levels. Today's huge fall along with the surge in trading volume could amount to a blow off, so we should see a positive day tomorrow. However, lets not forget that we are currently in an intermediate neutral trend, one which has not proven itself capable of turning back up again, as such, any travel within the 12750 and 12000 remains reasonable for the Dow. This 4 days free fall has broken the previous reversal pattern, leaving the intermediate trend once again in neutral territory. This is looking more and more like the big sideways market of 2004. Perhaps such a year of limbo is a must for all recovering markets following every economic crisis.

For now, the Dow turns a short term bear trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

US Debt Bear Trap...

The Dow retreated 88 points today as a wave of negativity swept across global markets on US debt problem.

Fundamentals
A wave of negativity swept across global markets today as news of US debt problem and the further downgrading of Greek debt ranted throughout the weekend over the media. Starting from Asia, every market opened and remained negative, leading to a deep negative opening in the US market. Indeed, these debt problems are the aftermath of the recent financial crisis and if not handled well, could jeopardize the current global recovery. There is always a period of "toxic clearing" within every recovery phase that could last as long as an entire year, before the real bull market starts. We saw that back in 2004 as well. The Chicago Fed National Activity Index released today also registered its worst level since Oct2009, adding to the negativity today. (The Chicago Fed Index is an index measuring economic activities and inflation on a national level by combining 85 different indicators. Positive number indicates growth above historical trend and negative number indicates growth below historical trend. See Stock Market Calendar.) However, there was clearly a significant level of bargain hunting in the morning session, which goes to show that there is no absence of optimism. This was also reflected in the bond yields rising across the board as investors take advantage of the bargain in the equities market. Indeed, such "debt news" driven drops have the potential to be just a one day affair.

Technicals
A pretty scary looking drop today which looks nothing more than a bear trap. Short term bullish momentum continues to rise on our short term indicators and there is no indication that this is going to be anything significant. As such, I would expect the market to come back up as quickly as tomorrow.

For now, the Dow remains in a short term neutral trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

Reversal Completed

The Dow made a small negative day today as I have predicted in yesterday's email to paid subscribers, closing downwards marginally by 15 points.

Fundamentals
Market was slightly negative today as Existing home sales turned in worse than expected. However, optimism is clearly very much in the air as the news failed to affect the market very much. In fact, bond yields rose across the board today strongly as investors reallocate back into equities and options traders continued to keep the total equities put call ratio in favor of Call Options trading. The VIX also dropped today even though the market was down. Whenever the VIX drop on a negative day, it is a signal that the market might turn bullish again as soon as the very next day. This has the same leading effect as the VIX rising on a positive day. Perhaps positive surprises in tomorrow's Jobless Claims, Philley Fed and Leading Indicators would fuel the optimism.

Technicals
The Dow pulled back today slightly as I have expected. Indeed, a couple of sideways or slightly negative days following huge single day rallies are to be expected as traders take short term profit off the table. In fact, with the evidences so far, it seems like the market could regain its bullishness as early as tomorrow. Yes, the reversal out of the intermediate correction is now complete so let's look forward to a new leg upwards.

For now, the Dow remains in a short term neutral trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

30MA Tested...

The Dow continued downwards by 94 points on potential US debt problem.

Fundamentals
Market was decidedly negative right off the gate on talks of US debt problem all through the weekend. In fact, the Dow went as low as 183 points lower intraday before bargain hunting set in to bring it off its low. Even though it was a decidedly negative day, there wasn't much reaction from the bond yield curve and total equities put call ratio to support the negativity. Long term bond yields actually rose as investors put their long term investments back into equities. Options traders actually moved the total equities put call ratio down below par in favor of call options trading. This shows that even though there are fundamental concerns in the economy, technical bargain hunting is evident and investors might be seeing value at the current levels.

Technicals
Both the Dow and the S&P500 bounced off their respective 30MAs intraday today which could turn out to be the retest of the 30MA I have been talking about recently. Indeed, such hammer formations are typical of short term reversals especially around the 30MA. However, we will still need to see a good follow up tomorrow in order to confirm this. However, it is of little doubt that investors are ready and willing to buy and that supports the long term bull trend scenario.

For now, the Dow remains in a short term bear trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

End Of Pullback?

The Dow made a slight pullup today, closing higher by 44 points as some investors buy into the Fed's easing promise.

Fundamentals
Investors ended a lackluster morning and bought into the market in force after Bernanke's promise of further easing, pushing the Dow higher by more than a hundred points. However, the strength quickly dissipated as profit taking took over the rest of the day, taking the market to close much lower. Of note, the VIX once again closed higher despite a higher close in the market. The VIX should move in opposite direction to the S&P500 under normal conditions. Whenever the VIX rise on a higher S&P500, a sell off typically happens within a couple of days. The last time this happened was back in July 6 which started this correction just 2 days later. Investors were obviously cautious ahead of tomorrow's Jobless Claims as analyst's expectation of a much lower number seems to be setting up for a disappointment.

Technicals
Even though the Dow closed higher today, it closed within the lower half of yesterday's trading range, making it more of a sideways day than an up day. A strong up day within a strong short term down trend is totally normal and actually sets it up to move on lower over the next few days. None of my short term indicators show any change in short term bearish momentum and with supporting evidence from the VIX, there is no doubt the Dow is going to continue on towards its 30MA.

For now, the Dow remains in a short term bear trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

Pullback Continues...

The pullback continues today as the Dow closed a huge 151 points lower after last Friday's big Jobs Report disappointment.

Fundamentals
The huge disappointment in last Friday's Jobs report started this pullback which actually adhere closely to expectations of a technical pullback. Investors rushed out of equities and back into bonds, depressing bond yields across the board strongly. Traders also ran back into the protection and short term downside speculation of put options, causing a surge in the total equities put call ratio. Indeed, last Friday's jobs report was a surprising disappointment especially when almost all of the leading indicators up to that point is suggesting a better than expected report. In fact, analysts were expecting better no-farm payroll and better unemployment rate than the month before. However, both critical measures turned in not only worse than expected but worse than the month before with non-farm payroll turning in only 54K versus consensus of 232K and unemployment rate rising to 9.1% versus consensus of 8.9%. This sudden drop reminded investors and traders never to be too certain about economic data forecast. However, with the way economic data is actually recovering, I would see this pullback as a temporary one and that investors would return once again when the coming numbers such as this Friday's Empire State Index beats expectation.

Technicals
As I said last week, this isn't the kind of market that can go straight up under deep overbought conditions and the disappointment in the Jobs report actually started the pullback that I was expecting. Indeed, this market cannot move on higher without confirmation of this new bull trend by testing its 30MA for support. Lets wait and see how the market perform as the Dow approaches its 30MA. Good entry points would certain present themselves once the integrity of the 30MA is tested. Could it coincide with a better than expected Empire State Index this Friday?

For now, the Dow turns a short term neutral trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

Going Deeper Into Overbought...

The Dow continued to climb today by 56 points carried by better than expected sales figures.

Fundamentals
Redbook posted a year on year store sale gain of 5.2% versus 2.5% last week. This is an extremely strong sales figure which is somewhat supported by the weekly ICSC-Goldman Store Sales' year on year figure. Consumers is the backbone of the US economy and a recovering consumer is a recovering economy. This is probably what gave some investors the guts to chase into this already short term overbought rally. However, not all investors think the same way as bond yields collasped across the board due to reallocation back into the safety of bonds. Options Traders also continue to keep the total equities put call ratio above par in favor of put options trading. Furthermore, the VIX actually rose today even as all three major indexes were up. Under normal circumstances, the VIX move inversely to the movement of the S&P500, however, when the VIX move in the same direction, it usually mean that there might be a change in short term sentiment shortly... in fact, as soon as tomorrow. This happened back in 29 April 2011 when all three major indexes were positive along with a positive VIX. This led to a one week slide from the next trading day onwards. (see bond yield curve, total equities put call ratio and the VIX at http://www.optiontradingpedia.com/option_trader_hq.php )

Technicals
The Dow continued to move upwards despite being in short term overbought condition. There is almost no doubt by now that the bull trend has resumed and this "Intermediate Correction" has ended. The only question is when or if we could expect a slight pullback in order to set up good entry points. Even though the Dow is used to powering onwards and upwards in deep overbought condition in strong markets, I am not sure if this is that kind of market condition. Today's market condition continue to be ruled by a lot of fear and changes in the macro-economic situation. Putting all the odds together seem to suggest that the Dow should make a slight retreat before it can move on higher. This is particularly true with the NASDAQ Composite which has made its 7th straight up day today.

For now, the Dow remains in a short term bull trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.

Welcome Back From Independence Day

Welcome back from the Independence Day Long Weekend! What a week it has been last week!

The Dow made it's biggest single week rally for the year 2011 last week, gaining a whopping 648 points in a single week. The last biggest single week gain was back in March 2011 when the Dow reversed out of a short term correction. The Dow also did this reversal on the back of its 30WMA, which makes it an extremely credible end to the current intermediate correction. Indeed, this intermediate correction seems to be ending way too early... which once again mean that we are still overdue a significant correction of the kind we saw back in May 2010 and certainty demands some cautiousness going forward.

This reversal also came on the back of a much better than expected ISM index last Friday which gave it the fundamental support the market needed to confirm the reversal. The ISM Index bucked all previous leading indicators and turned in 55.3 versus a consensus of 52, which is lower than last month's 53.5. Indeed, analysts were expecting a poorer number this month due to all the leading indicators so far but the ISM index surprised everyone by turning in not only better than consensus but better than last month in a pattern that seems to suggest a few more months of better ISM index to come. Yes, such is the strong fundamental that is needed to end strong corrections.

Jobs report is going to be released this Friday and analysts are expecting a better showing this month and if analysts expectations are beaten once again, that could secure the market for yet another new high. Happy trading to all!
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.