Stock Market Analysis

Monday, February 06, 2012

12,800 Gravitational Pull Still Strong

The Dow moved sideways today, closing down marginally by 17 points.

Fundamentals
After last Friday's explosive day, a few sideways days is to be expected especially on a day like this with completely no economic data release. Short term traders took some profit off the table while some investors reallocate back into the safety of bonds. However, nothing in the cards suggest that there is a change in general market sentiment especially after last Friday's powerfully positive jobs report. There is no doubt the US economy is still recovering despite some toxic waste remaining here and there, especially in the Euro zone. However, it is just a matter of time world markets will enter an extended period of volatility again on toxic waste clearing like what we saw back in the 2005 period and I think the time might be soon.

Technicals
The Dow made a run for it last Friday and barely broke the 12,800 points resistance level. However, it is clearly still within the gravitational pull of the 12,800 points zone and could still turn around for a short term retest of the 30MA before it has energy to prove this breakout as a real one. This is especially so with the ever declining average trading volume since this bull leg begun last October. In fact, the market might require a correction as deep as the one last November in order to create better entry points and woo some traders and investors back.

For now, the Dow remains in all out bull trend.

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