Stock Market Analysis

Tuesday, September 06, 2011

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.

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