Stock Market Analysis

Tuesday, October 04, 2011

Technical Bulls and Bears Battle It Out!

The Dow gained 153 points today as fierce fight for territory at the 200WMA ensues.

Fundamentals
Despite somewhat better sales data and Factory Orders, traders continue to take the market lower in technical based trading. Indeed, market action these few days has ignored heavyweight positive surprises in the economic data and persisted in selling off on every bit of strength on technical based trading. On the fundamental front, US economic data seems to be on a recovery phase once again as the recent data, including the ISM Index has turned in better than expected. However, investors still have plenty of reasons to be cautious due to the unresolved European debt issue while traders have plenty of reasons to short into the recent strong bearish signals in the market. So lets take a look at what the technicals are saying about today's market action.

Technicals
Today is truly a battle between the technical bulls and the technical bears. Technical traders have been predominantly bearish over the past few days on the obvious resistance from the 30DMA. However, as the Dow hit its 200WMA intraday today, some technical bears has begun to turn technical bulls, expecting the 200WMA to hold up strongly like it has done so far. This led to the battle we saw today with the bears taking the market down right from the start and then accumulation around the 200WMA into the close with the bulls winning the day. Indeed, just as the 30DMA was a strong resistance, the 200WMA is an extremely strong support level as well. Like I mentioned before, the market might just trade range bound by the 30DMA and 200WMA for a while more until some significant development arises on the fundamental front.

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

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