Stock Market Analysis

Monday, September 19, 2011

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.

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