Stock Market Analysis

Wednesday, October 19, 2011

Struggle Continues at 11,600 Points Zone

The Dow continues to struggle around the 11,600 points resistance zone, closing down by 72 points as investors continue to be uncertain ahead of tomorrow's major leading indicators.

Fundamentals
More uncertainty surrounding the Euro zone issues as well as tomorrow's leading indicators caused traders to take short term profit off the table today after a nice early session. The Empire State Index's disappointment early this week also set a negative tone to the coming leading indicators which might yield the market to the side of the bears should they turn out worse than expected, especially at this critical technical junction. Analysts are expecting slightly better numbers for all leading indicators as well as jobless claims tomorrow which may lead to an easy disappointment. Economic data seems to have recovered from their volatility since last week but how the Empire State Index turned out still threw a spanner into the clockwork.

Technicals
The Dow continues to struggle at this very critical 11,600 resistance zone. It has failed to break out of this area over the past two months leading to two full months of volatile sideways trend but this time round, it is not going down without a fight. Indeed, this is the first time over the past two months that the Dow has spent so long struggling at this level. This can only mean two things; chances of it holding up and reversing into a new bull leg is very high but if it fails to do so, the coming bear leg might be a strong one. Short term bearish momentum continues to rise and short term bearish formations appeared on my Star Trading System abundantly. As such, I continue to stick to my view of a retest of the 30DMA which will tell us where this market is going.

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

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