GDP and Jobless Claims Fight Back!

The Dow recovered some lost ground today, closing upwards by 143 points as both GDP and Jobless Claims turned in better than expected.

Fundamentals
US market received a much needed boost of confidence today as both Q2 Final GDP and Jobless Claims turned in much better than expected, leading to a high opening. Q2F Real GDP turned in a surprising 1.3% vs consensus of 1.2%. Even more surprising was the huge drop in jobless claims to 391K. Jobless Claims has not went under 400K since March 2011, making it an extremely significant development on the jobs front. In a consumer driven economy, all good news on the jobs front is good news for the stock market. However, the strength led once again to a steep sell off all the way into the final hour before the bulls fought back for some lost ground. In fact, bond yields continued to drop across the board today suggesting that investors are still using good news as exit points. Indeed, today's good economic data didn't seem to have changed the fundamental lack of confidence that the market is going through right now. It is going to take a lot more, especially developments in the European debt issue, to truly turn things around.

Technicals
Even though the Dow made significant gains today, it still stopped short at its 30DMA, forming a third consecutive lower high and lower low candle. No matter how the Dow closed, three consecutive days of lower high and lower low is extremely bearish and the fact that the 30DMA once again stopped its advance dead in its tracks tells me that the market is in a lot of trouble technically unless something change fundamentally, quickly.

For now, the Dow remains in a short term neutral trend within an intermediate bear trend and primary bull trend.

30DMA, 200WMA...

The Dow followed up on yesterday's rally, gaining 146 points against mixed economic data today.

Fundamentals
US index futures were already pointing sharply higher before US market open today as a wave of optimism swept across global markets before US market open. Investors continued to return to equities from the low bond yields, pushing up bond yields across the board significantly once again. However, these two day's optimism came on the back of no strong fundamental support and that has led options traders to start getting cautious and moved back to put options trading for some downside protection. Total equities put call ratio rose significantly in favor of put options trading which is unusual for a strong buying day. Indeed, one cannot ignore the steep selloff during the last couple of hours of today's session which may well make this two days "rally" nothing more than a dead cat bounce.http://www.blogger.com/img/blank.gif

Technicals
Even though it was a strong day in the market today, the Dow actually sold off intraday around the 30DMA level and closed below it. This shows that the 30DMA continues to be a strong resistance level. It is now the battle of the 30DMA and 200WMa... breaking out and staying out of these levels will pave the way for the market at least for the next 30 days. The Dow has failed to complete a reversal after two good attempts over the past month but it has also failed to break below a strong 200WMA support. Yes, the market is in some kind of stalemate now, the kind of condition you don't want to take sides in. Time for a Volatile Options Strategy?

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

Dow: One More Step And Off The Cliff...

The Dow revisited its 200WMA last week in a solid landslide week and is once again sitting right there on the 200WMA. As I have mentioned before, everytime the Dow breaks below the 200WMA, it goes into a significant down trend and being here once again after failing a reversal attempt along with so many fundamental issues in US and Europe makes it a very dangerous time to try to spot for longs. The Dow also formed a short term head and shoulders formation which also puts the odds in favor of a downside breakout. Unless this week pulls back up strongly, the market could go very much lower with immediate psychological support at the 10,000 points level. It is going to be a fairly quiet week ahead with no heavyweight economic releases, as such, the only way the Dow could pull back up strongly would be due to developments in the European debt issues. That is something nobody can predict for now.

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

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My Star Trading System produced a qualified trade on the November $13 strike price put options of MMR on 9 Sep 2011. I issued that same pick in my Master's Stock Option picks service and bought those options for $2.32.

On 22 Sep 2011, I sold the position for $3.20 at a 38% profit! Below is my transaction record and chart:





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The Dow Back To Square One

The Dow collapsed by a huge 391 points today as Wednesday's failed retest of the 30DMA led to the strong avalanche that I spoke of all week long this week.

Fundamentals
The Fed's failure to please the crowd on Wednesday along with worse than expected Jobless Claims today led to a strong sell-off today. In fact, this strong sense of pessimism has already affected markets all over the world before US market opening due to how the US market reacted to the FOMC Announcement on Wednesday. Investors also looked past a better than expected leading indicators and rushed back strongly to bonds, depressing bond yields across the board to recently unseen lows. Options traders continue to favor put options trading strongly today as they continue speculation to downside. Overall, this is an extremely negative market which could lead to new lows if no groundbreaking development arise from the European debt issue.

Technicals
I mentioned on Tuesday that the Dow could have a chance at a bullish reversal "unless it goes back down below the line and take back all of last Thursday's gains". That's exactly what happened on Wednesday itself. The Dow retested and failed to hold up the 30DMA and took back all of last Thursday's breakout candle gains all at one shot. A failure of such a critical reversal point reflects a failure of confidence which will lead to a lot more lows. In fact, today's strong follow up to downside also led the Dow into a bearish breakout of the recent lowering pennant formation and brought us back to the revisit of the 200WMA scenario the market was in before last Thursday's breakout.

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

Fear Ahead of FOMC Announcement

The Dow moved sideways today, closing marginally higher by 7 points as huge intraday gains gave way during the last two hours to short term profit taking ahead of tomorrow's FOMC Announcement.

Fundamentals
Even though global markets were largely positive today, US investors and traders sold off initially on the worse than expected sales data released pre market. However, optimism in the global markets before US market opened caught up quite quickly and took the market to their session highs. However, US investors and traders took the opportunity to take some quickly short term profit and sold off in the afternoon ahead of tomorrow's FOMC announcement. There is a lot of uncertainty surrounding the FOMC announcement tomorrow with the GOP leaders urging against further rate cuts as if they already know a rate cut is in the making. Indeed, a rate cut right now would do very little more than increase the risk of inflation. The economy is suffering from fundamental issues that cannot be directly cured using rate cuts. The rest of the week is certainly going to be turbulent with the FOMC announcement tomorrow and Jobless claims as well as Leading indicators on Thursday, all of which can sway sentiments strongly.

Technicals
The Dow is clearly under significant short term pressure right now as it once again failed to make any head way. However, the Dow still managed to hold on to last Thursday's gain, which is a breakout candle. That, along with the fact that the Dow continue to trade above a now rising 30DMA, puts the odds in favor of a bullish reversal unless it goes back down below the line and take back all of last Thursday's gains. Short term bearish momentum is now rising indicating possible short term weakness coming up. The Dow could retest the 30DMA for strength before the reversal can happen. The Dow survived multiple strong bearish formations to get this far and it certainly won't give up without a fight.

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

Dow Reversing?

The Dow made an impressive gain last week, posting the first weekly gain after two consecutive down weeks. Last week's "rally" didn't come on the back of any major fundamental improvements but made significant signs of a reversal out of this intermediate bear trend on the technical front. With last week's rally, the Dow has now completed a nice intermediate term double bottom on the weekly chart supported by rising bullish momentum. This is also supported by the bullish breakout of the short term wedge formation on the daily charts and the only thing that seems to stand between the Dow and a full reversal is the daily 200DMA resistance level.

This is a critical resistance level which the Dow can still fail at. A failure at the 200DMA is a serious one which will lead to much more downside to come. As such, this is not the time now to be newly bullish yet but to monitor market sentiments for a better entry point.

This is also FOMC week where the Fed will announce rate decision on Wednesday. Investors and analysts are not expecting the Fed to do anything but keep rates steady for now in the face of the economic uncertainty so there should be no surprises on that front. As such, the big economic releases this week seems to be the Jobless Claims and Leading Indicators on Thursday.

Dow Above 30DMA At Last...

The Dow broke out of its short term wedge formation today, closing above its 30DMA significantly for the first time since this correction begun, ending the day upwards by 186 points.

Fundamentals
The market today is unexpectedly strong, driven by optimism in the global market before US market opened. In fact, almost all the economic data today turned in worse than expected so there is no real fundamentals behind today's strong move. As such, it is suspected that the buying may be due to the exercise of some derivatives instruments ahead of tomorrow's Quadruple Witching day where a bunch of derivative instruments are set to expire all at once. Quadruple witching days are generally days of huge volatility, huge trading volume as derivatives are exercised for their underlying stocks but are also generally days of very limited net gain or loss. Quadruple witching days therefore usually end in a small bodied candlestick with long wicks and huge volume like we have seen so many times in the past.

Technicals
Clearly, today's move is technical but a very significant one. The Dow has not closed significantly higher than its 30DMA since this intermediate bear trend started and this move truly breaks its downwards momentum. Today's move marks the first step for the Dow if it wants to break the current lowering penant formation to the upside. It is clear now that the top of the lowering pennant has moved on to the 50DMA and only by clearing that level and then subsequently the 200DMA which is just above the 50DMA now, can the Dow assure itself of a reversal.

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

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Dow Caught In A "Wedge"

The Dow gained by 44 points today on the back of better than expected Store Sales and continued bargain hunting brought over from yesterday.

Fundamentals
Even though Store Sale turned in better than expected, Redbook's store sales actually turned in lower than last week. As such, sales data today was actually more mixed than positive. However, investors continued to return to equities on the back of bargain hunting left over from yesterday's optimism. Investors could also be pricing in better than expected performance for the coming leading indicators on Thursday. Analysts are expecting both the Empire State Index and Philley Fed to turn in better than last month this time round and certainly such a turn around in economic data is what investors have been waiting for. However, we have seen what such optimism before major economic releases has done lately; leading to nothing more than a strong profit taking.

Technicals
Clearly the Dow is in some kind of a wedge right now. On the one hand, it is being compressed by a lowering 30DMA into a lowering pennant formation. On the other hand, there is significant accumulative strength around the 11,000 level which we have seen since last month. This has caused the formation of a small lowering triangle formation or a "wedge" formation at the end of the lowering pennant formation. Such formations indicate extreme uncertainty and increases the chance of a significant leg up or down depending on the direction of breakout. Yes, this means that this could be the junction where the market decides where it wants to go for the next month or more. Going by the setups so far and the prevailing intermediate trend, odds would no doubt favor a downside breakout but that's not something you want to put everything you have on right now.

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

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Dow Headed For Bearish Breakout

The world commemorated the 9/11 tragedy today, reminding ourselves how precious peace is.

The Dow turned down by a total of 501 points last week as the Dow headed back down to its 200WMA as I have predicted last week. On the daily scale, the Dow did a textbook style turn around at its 30DMA, heading downwards for a possible bearish breakout of its lowering pennant formation. If the Dow breaks out of this dangerous pattern to downside, we could see a revisit of the 10,000 points level, which is of course back down to 2009 levels which will bring the stock market inline with economic data so far. On the weekly scale, if the Dow breaks out below 10,750 points, it would breach its 200WMA which is always a very dangerous thing to do. Over the past 10 years, everytime the Dow breaks below the 200WMA, we could see significant new lows in the near future.

Good thing for my stock options picks subscribers and Star Trading System students that our system has placed us nicely on the correct side of the market with a couple of good bearish picks so far.
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Dow Forms Lowering Pennant Formation...

The Dow staged a surprise rally today, the kind that we have been seeing over the past month of volatile sideways trend, closing higher by 275 points.

Fundamentals
US market got off on a great start today as a wave of optimism swept over global markets prior to US market opening. In fact, index futures were already pointing sharply higher way before the better than expected sales data from the Redbook report. Investors rushed back for equities once again today in their see-saw game as they did all month long so far. Bond yields rose sharply across the board as investors sold off on the high bond prices and returned to stocks. Traders seem to be convinced that today's rally might be fundamentally different as options traders brought the total equities put call ratio down below par in favor of call options trading for the first time since this correction begun.

Technicals
The Dow revisited its 30DMA once again, continuing its recent behavior of sudden big moves. Today's move however, completed a "Lowering Pennant" or "Bear Pennant" formation, which is an intermediate bearish continuation formation. It is a formation which is formed through an extended period of sideways range bound trading following a significant down trend and is usually limited at the top by the 30DMA or 50DMA. Such a formation usually mean that the market could go either way significantly from here. If the Dow turns down again from here and breaks out to the bottom of the pennant, we could see a very significant new leg down. However, if the Dow breaks out to topside, we could have ourselves a reversal. However, being a bearish continuation formation, odds favor a downside continuation.

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

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

Dow Continues Decline...

The Dow declined by 100 points today as better than expected ISM Services helped lift the market off its deep opening loss.

Fundamentals
US market opened deep in the red as a wave of pessimism surrounding its poorer than expected jobs report hit world markets through the long weekend. However, a much better than expected ISM Services index encouraged some traders to return to the stock market, lifting the market all the way off its intraday low. The ISM Services or ISM Non-Manufacturing Index, is a cousin of the heavyweight ISM Manufacturing Index and does not usually has the influence to affect the stock market significantly. However, in a market thirsty for any bits of good economic data, the ISM Services today is enough to encourage traders to jump right in for it. However, none of the three major indexes managed to par losses and still ended the day red. While traders showed some encouraging buying today, bond yields continue to drop across the board as investors continue to head for the safety of bonds. Indeed, such as the kind of "rallies" that actually encourage profit taking/loss cutting.


Technicals
The Dow continued to retreat as expected today. Even though there were some intraday strength, short term bearish momentum continue to rise and market sentiments continue to be generally bearish. The Dow also created an inverted hammer candlestick signal today, which is a candle stick with a small body and a long wick on the bottom. Such a signal is a possible reversal signal if it occurs after a significant downtrend. However, inverted hammers this soon in a retreat creates a continuation signal for the market to go lower still. So far, there is nothing in the charts that suggest a reversal and a visit to the 10,750 level continues to be in the book.

For now, the Dow remains in a short term neutral trend within an intermediate bear trend and primary bull trend.

Welcome Back From Labor Day!

Welcome back from the long weekend!

The market couldn't be more predictable last week with the Dow turning around at its 30DMA in a textbook manner, coinciding with the worse than expected jobs report on Friday. The Dow retreated a net total of 44 points last week, ending the dead cat bounce midweek and turning around on Thursday and Friday. Indeed, as I mentioned last week, the market is going to turn around lower no matter how the heavyweight numbers turn out and we indeed saw the market turn sharply lower on Thursday despite a better than expected ISM index. Investors also rushed back to the safety of bonds, depressing bond yields to recent lows. Index futures were already pointing sharply lower through the weekend and it does seem like this is going to be yet another negative week.

On the technical front, the Dow looks set to revisit its 200WMA at about 10,800 and could actually remain range bound between its 50WMA and 200WMA for an extended period of time like it did in 2004. This is the most optimistic scenario at this stage of economy "recovery". If the Dow should break below the 200WMA, we could see the primary bull trend jeopardized. However, I deem that to be a low probability scenario as all economic recoveries go through such a phase of toxic waste cleaning before the real bull trend starts.

For now, the Dow remains in short term neutral trend, intermediate bear trend within a primary bull trend.

Dow Fails At 30DMA As Expected...

The Dow turned around at its 30DMA as I have expected, closing lower by 119 points despite a better than expected ISM Index.

Fundamentals
The first of this week's super heavyweight data, the ISM Index, turned in slightly better than expected but all it led to is a profit taking sell off that took the market off its high into the red as I have expected yesterday. Investors have indeed been pricing in better than expected ISM Index and Jobs Report over the past two weeks, resulting in a rally that has almost no fundamental support. Such a rally usually ends in a sell off no matter how those data turn out and this time round is no different. On top of that, the ISM Index really isn't impressive. Even though it was better than expected, it was still lower than last month, reinforcing the retreating growth scenario. In fact, I would see this sell off continue into tomorrow no matter how the jobs report turn out.

Technicals
The Dow retreated from overwhelming resistance built up over the past few days as expected. Two strong bearish candlestick signals occurring at the 30DMA in an intermediate bear trend at the top of a short term rally with no fundamental support. This one is textbook. Odds now favor a revisit of the 200WMA at about 10,750 once again.

The Dow remains in a short term neutral trend within an intermediate bear trend and primary bull trend.