Stock Market Analysis

Thursday, September 01, 2011

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.

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