Stock Market Analysis

Tuesday, November 29, 2011

Dow Goes Sideways As Expected

The Dow closed marginally higher by 32 points today as expected on better than expected economic data.

Fundamentals
Today's slew of economic data turned in largely better than expected, especially the Consumer Confidence number, leading to a largely optimistic day. However, short term profit taking quickly set in later in the day and took the market off its best levels for the day. That did not stop investors from moving back into equities from bonds lifting bond yields across the board once again and options traders surprisingly kept total equities put call ratio below par in favor of call options trading for a second straight day in a row, which is something we hadn't seen in a while. It is now a battle between US economic data and news from the Eurozone as every better than expected economic data lifts the market while news from the Eurozone puts pressure on it creating the kind of volatile market condition the US market is going through right now. A better than expected ISM Index and Jobs report later this week would certainly help lift the market for the short term.

Technicals
As mentioned in my email to paid subscribers yesterday, I expected the Dow to make a few sideways or even slightly negative days these few days following Monday's rally and so it happens. The Dow made a largely sideways day today along the 16,000 resistance zone, which means that it continues to be in danger of turning downwards from here into some nasty lows. As such it is still time to be cautious. A topside breakout will continue the reversal into a longer term volatile bull trend while a bottomside breakout will almost certainly reverse the intermediate trend into a bearish one which could ultimately threaten the primary trend itself.

For now, the Dow remains in short term neutral trend, intermediate neutral trend and primary bullt rend.

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