Stock Market Analysis

Monday, November 07, 2011

Dow Rallies on European News

The Dow continued to struggle today on last Friday's disappointing Jobs Report but still managed to eke out a gain of 85 points by the end of the day.

Fundamentals
It was a largely negative day in the US market today as investors continue to exit on the poorer than expected Jobs Report last Friday. Bond yields continue to drop today as investors continue to move for safe harbors. However, the weakness didn't last long before investors and traders bought into news from Europe in the afternoon, bringing the market back into the black. Total equities put call ratio declined significantly as put options trading declined against call options trading as options traders reduce their hedges and downside speculation today. Indeed, every development in the European debt issue affects US stock markets almost instantaneously and it seems like it is going to take a major development to really trigger off a sustained rally here.

Technicals
Traders continue to buy into the reversal today on weakness, providing support once again around the 19,000 points area. However, volume was missing from today's market, making today's gain a pretty weak one. Good news is, nothing that happened over the past two trading days changed the reversal pattern. In fact, as long as the bull starts running again, we would be good to call an intermediate bull trend. The Dow is still in a healthy reversal pattern coming out of the volatile neutral trend and still very much set for a new bull leg.

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

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