Stock Market Analysis

Wednesday, November 02, 2011

Dow Meets Support

The Dow gains 178 points today as the market accumulates from the steep 2 days drop.

Fundamentals
The Dow gained on relatively thin trading today as ADP employment beat expectations, casting some optimism on Friday's Jobs Report. Fed chairman's speech after 2pm also gave the market a little bit of a boost into the close. Even though it was a pretty big gain in the Dow today, investors didn't quite pour into the market the way they should on really strong days. Trading volume was light and bond yields rose insignificantly across the board suggesting that investors aren't reallocating back into equities much. In fact, options traders continue to keep total equities put call ratio above par in favor of put options trading. All in all, it was a really cautious rally today without much real enthusiasm. Indeed, analysts are expecting a worse Jobs Report on Friday and that kind of uncertainty surely cannot result in clear cut optimism just days before its release.

Technicals
Today's rally is mainly technical in nature as some traders accumulate around the 11,600 level, which was the seemingly unbreakable resistance level of the neutral channel of Aug to Oct. In fact, accumulation around this area can be a substitute for retesting the 30DMA for reversal confirmation, as long as it follows up tomorrow. So far, this new bull trend still looks set and remains healthy as long as the Dow remains above its 30DMA.

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

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