Stock Market Analysis

Monday, June 11, 2012

Dow Slumps 142 Points

The Dow lost 142 points today as worries over the Euro zone resumes.

Fundamentals
US market opened strongly today along with the strong performance in global markets pre-open but quickly succumbed to selling pressure as issues in the Euro zone begun to take headlines. In fact, it is not unusual to see a negative Monday if global markets are surprisingly strong on Monday pre-open. The US market tends to perform opposite to global market performance on Mondays. Bond yields dropped across the board as investors returned to the safety of bonds and options traders continue to keep total equities put call ratio between 0.9 and 1.1 suggesting indecision.  It is going to be a volatile week ahead ending in a Quadruple Witching on Friday and I suspect the market is going to be largely technical driven, just like today.

Technicals
I have predicted many weeks ago that the Dow is going into a sideways volatile channel bounded by the 12,600 and 12,200 points. Today, the Dow turned around after opening at the 12,600 area and headed strongly southwards in continuation of my prediction. Of even more significance is the fact that it visited the 30MA intraday and failed. This is an extremely bearish setup which may lead to a revisit to the 12,100 points area. However, don't be surprised to see a slightly positive day tomorrow or a largely sideways week ahead as every big day leads into a few slightly opposite or sideways days.

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

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