Stock Market Analysis

Tuesday, September 27, 2011

30DMA, 200WMA...

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

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.

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.


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