Stock Market Analysis

Monday, March 26, 2012

Investors Cheered on Ben Speech

The Dow gained 160 points today as Fed chairman promises to keep expansionary monetary policy.

Fundamentals
Uncle Ben's promise to keep rates low in order to continue encouraging job growth before market open today pleased investors and drove index futures up high leading to a positive opening. Investors have been concerned about the Fed increasing rates after such strong job growth as reflected in the Jobs Reports so far and today's commitment to a low rate truly encouraged the market to come back in a big way. In fact, the SP500 made a new 4 year high today. Strangely though, unlike truly strong market days, bond yields remained relatively stagnant suggesting that investors have yet to reallocate back to equities strongly. Options traders also continued to keep total equities put call ratio above par in favor of put options trading. Would these investors and traders join in the fray over the next few days?

Technicals
The Dow completed its retest of the 13,000 points + 30MA today as it rebounded off the 30MA line intraday last Friday and resumed the bull trend strongly today, coinciding with the positive commitment from the Fed. It is amazing to see how fundamentals always coincide so nicely with technical setups which is what made me focus on technicals more than fundamentals. So far, the Dow has done everything I said it would to the dot, very classic bull trend behavior and setups. As the quarter ends, investors would once again be concerned about "Selling in May and Run Away" and with the market so overdue another intermediate correction, this could well be the final up leg before the volatility of an intermediate correction hits.

For now, the Dow turns all out bull trend.

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