Stock Market Analysis

Monday, July 18, 2011

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.
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