Stock Market Analysis

Tuesday, October 25, 2011

Economic Data Disappoints...

The Dow took a hit today as economic data once again turned in disappointing, closing downwards by 207 points.

Fundamentals
Just when investors and traders have mustered enough confidence in the trend of recovering economic data, almost all economic data today turned in disappointing, leading to a selloff. Both sales data today turned in worse this week with Consumer Confidence taking an unexpectedly huge hit. Even the increase in Investor Confidence did quite make it above the safety mark leading investors to run back into bonds like scared bunnies. Bond yields dropped across the board today sharply with total equities put call ratio moving above par in favor of put options trading once again. Indeed, investors and traders has turned from being technical sensitive like they did over the past 2 months to being very fundamental sensitive in anticipation of a new bull leg. With such a focus in the market, we can expect every major economic release for the rest of the week to have a big impact on the market. That will lead to a pretty volatile week ahead I am sure.

Technicals
No surprises today. I predicted this pullback in my email to paid subscribers yesterday as the market needs to vent some of its short term overbought condition and also test the integrity of this "reversal". In fact, I won't be surprised the Dow retests its 30DMA before the real bull run begins and that is IF it survives the retest. As such, this is still the time to be spotting good entries and not making them yet. That is also what my Star Trading System is doing now.

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

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