Stock Market Analysis

Monday, January 30, 2012

Dow Continues To Struggle...

The Dow continued to move sideways today, closing marginally lower by 6 points.

What started out as a dismal opening turned around on much better than expected Dallas Fed Manufacturing Survey at 10:30am, taking the Dow all the way back up to breakeven and the Nasdaq Composite into profit. Investors are definitely uncertain right now as the general sense of the market being overbought is now overpowering. Bond yields continue to drop as investors slowly reallocate back into the safety of bonds. Indeed, the market has been trading cautiously with plenty of short term profit taking over the past 7 trading days and it is certainly going to take some good surprises in the heavyweight numbers this week to convince investors to return.

The Dow continues to struggle around the 12,800 resistance zone as I have expected. It is going to take at least a retest of the 30MA in order for the Dow to gather enough potential energy for a breakout. At this stage, there is nothing to suggest that the Dow is going to fail at this level for some significant correction once again. In fact, there are plenty of evidence to the contrary. So, lets be patient and nimble and wait for signs of confirmation.

For now, the Dow remains in all out Bull Trend.

Tuesday, January 24, 2012

US Sales Data Disappoints...

The Dow closed slightly negative today by 33 points as sales data disappoints.

Sales data today turned in worse than expected, resulting in a deep red opening. However, the general sense of optimism in the market continues as investors and traders stepped in almost immediate and took the market off its lows. In fact, the NASDAQ Composite managed to get back into positive territory. This proves that the general sense of optimism in the market is strong enough to hold off or overcome bad news in the market which would otherwise have resulted in a significant down day in a generally pessimistic market. The rest of the week is littered with important economic releases such as Wednesday's FOMC Announcement, Thursday's jobless claims and Leading indicators as well as Friday's GDP. It can be expected that a worse than expected showing would have limited impact on this generally optimistic market while a better than expected number would provide the catalyst needed for the bull market to continue.

It is interest to see again and again how fundamentals coincide and support technical predictions. This time round, the disappointment in the sales data coincided with the 12,800 points resistance zone which I have been talking about over the past few days. We could see a breakout over the next few days if economic data continues to do well. However, this up leg is looking more and more overextended and I expect a significant testing of support level (perhaps the 30MA or 50MA, nothing too deep) should a breakout happen over the next few days.

For now, the Dow remains in short term, intermediate term and primary bull trend.

Sunday, January 22, 2012

Happy Chinese New Year!!!

It is Chinese New Year today, signifying the beginning of the Chinese year of the Dragon. Here's wishing all of my Chinese readers all over the world a very happy and prosperous Year of the Dragon! Gong Hei Fatt Choy!

Unlike western mythology, dragons are not symbols of evil in Chinese culture but rather symbols of good fortune and prosperity. So, is the year of the dragon going to usher in a prosperous bull market? Well, at least so far, 2012 is shaping up to be quite encouraging. The overall recovery pattern that started back in 2009's bottom pivot is completed with a successful intermediate retreat and continuation in 2011. There is no doubt now that the market is in recovery mode even though if you only realized it now, you would have missed a bunch of profit already.

The January Effect, also known as Capricorn Effect, seems to be back in the market this year as the Dow gains a nice 2.4% last week as economic data continues to be largely better than expected. The Dow has gained a total of 4.1% this month so far and it is now up against the 12,800 points resistance level. This was the very level which resulted in the nice double top formation leading to last July's intermediate correction. With the Dow in short term and mid term overbought condition, I would expect some struggle around this area before a committed breakout and continuation of the bull market. In fact, the Dow could retest its 30MA before mustering enough energy for a real breakout.

Overall, I am bullish on the year of the Dragon and will certainly be re-opening my managed account service so that I can help more people make more money this year! Those of you who wish to be on the priority queue for this service, please email me at . Let's make the year of the Dragon the most prosperous one ever!

Thursday, January 19, 2012

Dow Gains Despite Poor Philley Fed

The Dow gained 45 points in a rocky trading day on poorer than expected Philley Fed.

US market opened positive today on better than expected Jobless Claims data before being mercilessly slaughtered by a poorer than expected Philley Fed released at 10am. However, the general sense of optimism in the market overcame the short sell-off, leading to a rocky but steady climb. Investors continued to return to equities, bond yields across the board. Option traders also continued to trade in favor of call options, depressing total equities put call ratio. It is clear that the general sentiment in the market is a bullish one in which positive news have greater lifting effects than the depressing effects of negative news.

The Dow continued to climb steadily on a steadily rising 30MA. This is an extremely healthy climb with some volatility expected around the 12,800 points resistance level. Tomorrow is options expiration day for January options and will no doubt be a slightly volatile day.

For now, the Dow remains in short term, intermediate term and primary bull trend.

Tuesday, January 17, 2012

Empire State Index Beats...

The Dow gained 60 points today spurred by global optimism and better than expected economic data.

A wave of global optimism swept across the global before US market opening, lifting index futures. The optimism was then supported by a better than expected Empire State Index before US market opening, leading to a strong morning session before short term profit takers stepped in in the afternoon. It could be a pretty rough week ahead going by the way investors are going back into bonds and the VIX rising in a supposedly strong day. As such, I won't be surprised to see a few negative days going forward.

The Dow has been climbing steadily so far and seems due for a little pullback and a retest of the 30MA or the 12,200 level for support before the market can move on higher safely. There is nothing in the cards that suggest that such a pullback might lead to something uglier, as such, it could make a good accumulation point when it happens.

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

Wednesday, January 11, 2012

Dow Crawls Along...

The Dow continued sideways today, closing marginally lower by 13 points in a mixed trading day.

Global investors were hit with sanction threats from Iran which could affect one fifth of global oil supply, something which will raise oil prices and put pressure on equities. Investors struggled against the general sense of optimism in the market against the news and managed to close the day close to par. Investors rushed back for the safety of bonds today, depressing bond yields across the board strongly but traders seem to be more optimistic as they accumulated into the exodus, providing strength to return to breakeven throughout the day. Options traders also continued to keep total equities put call ratio significantly below par in favor of call options trading. All in all, the general sense of optimism in the market seems to be holding up against bad news globally so far and we should see a run at the very next good news, perhaps a surprise in Thursday's economic numbers.

Even though the Dow made nothing more than a sideways day today, it did attempt to continue the bull run yesterday, which is a very good sign under a total lack of catalyst. I would just need one good continuation run to turn the intermediate trend back to bullish. So far, the bull run over the past few weeks has been slow and steady and that's the way to go.

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

Monday, January 09, 2012

Totally Sideways...

The Dow struggled a gain of 32 points as the market continue to go sideways after last week's huge gain.

There were no economic data or news driving the market today, resulting in a lackluster trading day. Bond yields and total equities put call ratio remained largely unchanged as sentiments remained unchanged from last Friday, which is always a good thing on Monday. Tomorrow's sales data may well provide the catalyst needed for the market to continue, upwards.

The Dow continued to move sideways today as I have expected following last week's single day rally. Almost all big up days are followed with a few days (or up to a week) of sideways or slightly negative trading as traders take short term profit. The Dow still needs to find strong support around the 12,200 area in order to secure more upside. This may take the form of either a single day or intraday pullback to that level with the way the economic data is pushing the market right now.

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

Wednesday, January 04, 2012

Sales Data Beats!

The Dow gained 21 points today as economic data continues to recover.

Despite early short term profit taking, better than expected sales data today encouraged investors to return to equities gradually throughout the day, taking the market back into the green from a red opening. Indeed, the recent trend of better than expected economic data seems to have caught up with investors at last as they cautiously return to the market despite uncertainties in the Euro zone. In fact, this Friday's jobs report might be the catalyst needed for at least a short term bull trend.

A largely sideways day in the market as expected following Tuesday's strong rally. Even more encouraging is the fact that the Dow seems to be holding the recent breakout strongly. Expect a couple of sideways days more and we should see the Dow continue upwards as long as the 12,200 support level holds. When that happens, we could then call an intermediate bull trend.

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

Monday, January 02, 2012

Happy 2012~~!!!

Happy New Year 2012!

This is my first post for the year 2012 and 2011 has truly been a challenging one.

Surprisingly, even though 2011 proved to be uncertain and painful most of the year, 2011 actually turned out to be a slightly positive year overall with the Dow gaining 5.5% and S&P500 closing at par with 2010's close. The Dow also made a third year of gain since 2008, which on a yearly basis, continues the recovery scenario.

So far, the recovery from the 2008 crisis has been volatile but steady with volatility coming mainly from the Euro zone. I would see 2012 as a year of resolution of most of the global issues arising out of the 2008 crisis before the real bull market can happen. However, the market is also at a point where it could easily melt back down into an intermediate bear trend or primary bear trend if we don't see a breakout and strong support around the 12,500 level.

Indeed, the world is in uncharted territory and much has changed since the 2008 crisis in terms of investments as well as business. We need to be able to co adapt to the changes and adapt our mindsets as well. Investors need to be more and more patient and be able to expand their arsenal of investment weapons in order to profit consistently under such market conditions. It is no longer enough to be able to profit under trending conditions (using swing trading methodologies such as my Star Trading System) but also under volatile sideways conditions (using position trading methodologies such as my Ride the Flow system). Yes, this is the era of the sophisticated investor and even small retail investors and traders require such sophistication to make any kind of profit.

As such, I would say the theme of year 2012 for most retail investors and traders would be "EDUCATION". Most have seen how hard it is to profit in 2011 and this should trigger the need to get more sophisticated and educated. Remember, the first investment for all profitable investors and traders is in oneself.

Here's wishing everyone, an exciting and fulfilling 2012!