Stock Market Analysis

Wednesday, November 16, 2011

US Market Sells Off on Euro Slump

The Dow dropped 190 points today despite better than expected economic data.

Fundamentals
Investors sold off today during the final hour along with a slump in the Euro. Investors are certainly watching every news and development over at the Eurozone and would rush for safety at the very first sight of trouble. Today, the first sight of trouble is the slump in the Euro. A selloff in the Euro suggests a decline in confidence in the Eurozone which may reveal itself as some pretty nasty news in the near future. Having witnessed how such news from the Eurozone can affect the US market, it is no wonder why investors rushed back to the safety of bonds today, depressing bond yields across the board and why options traders rushed for put options, creating a spike in the total equities put call ratio in favor of put options trading.

Technicals
The combined effect of the Euro slump and the 12,000 points resistance resulted in today's retreat. However, the retreat was a relatively mild one and resulted in a rising low supported by the 30DMA. As long as the Dow turn around tomorrow, it would still be in line for good topside breakout.

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

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