Slower Economic Outlook
The Dow went sideways, closing down marginally by 12 points on slower economic outlook.
Fundamentals
Nothing surprising came out of the FOMC releases today; Slower outlook and rates kept unchanged. Even though investors did sell off slightly on the releases, bargain hunting still came in towards the end of the day to bring the market back up to almost breakeven. In fact, bond yields were higher across the board as investors were somehow wooed back into equities despite the slower outlook. Options traders continue to be non-directional, keeping total equities put call ratio between 0.9 and 1.1. Total equities put call ratio seem to reflect short term trading sentiments best and a reading below 0.9 indicates significantly more call options being traded and a generally bullish mood in the market while a reading above 1.1 indicates significantly more put options being traded and a generally bearish mood (learn about what Put Call Ratio is). I have people asking me why I kept on saying the market is largely uncertain when the market has been making a solid run over the past weeks? Well, the problem with such a run is that it has weak or no fundamental or technical reasons behind it. As such, every up day only brings with it the sense that it is the final up day of the leg, making it look more like a bull trap than anything.
Techncials
Indeed, this rally does look nothing more than a bull trap until it is confirmed with a success 30MA retest. Until that happens, you won't see the market go very much further from this point onwards as the market enters short term overbought condition. In fact, chances are that we would see the market turn south from tomorrow onwards for the 30MA line.
For now, the Dow turns a short term bull trend in an intermediate neutral trend and primary bull trend.
Fundamentals
Nothing surprising came out of the FOMC releases today; Slower outlook and rates kept unchanged. Even though investors did sell off slightly on the releases, bargain hunting still came in towards the end of the day to bring the market back up to almost breakeven. In fact, bond yields were higher across the board as investors were somehow wooed back into equities despite the slower outlook. Options traders continue to be non-directional, keeping total equities put call ratio between 0.9 and 1.1. Total equities put call ratio seem to reflect short term trading sentiments best and a reading below 0.9 indicates significantly more call options being traded and a generally bullish mood in the market while a reading above 1.1 indicates significantly more put options being traded and a generally bearish mood (learn about what Put Call Ratio is). I have people asking me why I kept on saying the market is largely uncertain when the market has been making a solid run over the past weeks? Well, the problem with such a run is that it has weak or no fundamental or technical reasons behind it. As such, every up day only brings with it the sense that it is the final up day of the leg, making it look more like a bull trap than anything.
Techncials
Indeed, this rally does look nothing more than a bull trap until it is confirmed with a success 30MA retest. Until that happens, you won't see the market go very much further from this point onwards as the market enters short term overbought condition. In fact, chances are that we would see the market turn south from tomorrow onwards for the 30MA line.
For now, the Dow turns a short term bull trend in an intermediate neutral trend and primary bull trend.
posted by Jason Ng at 8:55 PM
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