Stock Market Analysis

Monday, November 14, 2011

Dow Retreats Slightly At 12,000 Again

The Dow retreated by 74 points today as resistance continues at the 12,000 points level.

Fundamentals
There were no economic data or news today to account for today's thinly traded drop, as such, today's drop should be one of short term technical profit taking. Long term bond yields dropped as some investors who do not think the market can stage a bullish breakout reallocate back into equities. This is a week of leading indicators and investors might also be cautious ahead of those numbers as economic data recently has started to become more volatile once again (see Stock Market Calendar).

Technicals
Indeed, today's market action is largely technical in nature with short term profit taking on last Friday's strong single day gain as well as resistance by the 12,000 points level once again. Indeed, the Dow is back up to the ceiling of the wedge formation it is currently caught in but the good news is that the sell-off at the 12,000 points level this time round is an extremely soft and unenthusiastic one on very low volume. This shows that the resistance might be weakening, thus increasing the chance of a topside breakout. Indeed, a wedge formation occurring along a nice up trend usually leads on to more highs.

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

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