Stock Market Analysis

Monday, July 09, 2012

Dow Continues Pullback

The Dow continues its pullback, dropping 36 points today as global markets ditch.

Fundamentals
Jobs Report failed to meet consensus last Friday, leading to a huge single day drop which affected global markets on Monday opening. However, the truth is that even though consensus was not met, the headline was still better than last month, which isn't a bad thing at all. This is perhaps why we are not seeing the kind of all out landslide today typical of a really bad jobs report. Investors continued to run for the safety of bonds today, depressing longer term bond yields significantly. Options traders also returned to their "iffy" mode, taking total equities put call ratio once again back within the 0.9 to 1.1 range since last Friday. This is going to be a relatively quiet week with focus on jobless claims on Thursday.

Technicals
As expected, the Dow pulls back towards its 30MA once again like I said it would last week. Indeed, the Dow needs to retest the 30MA for strength before this new bull trend has any legs. Last Friday's jobs report seriously took the underlying fundamentals away and put this new bull trend in doubt once again. In fact, I won't be surprised to see the Dow going volatile sideways a bit from here until numbers start to recover again. This will happen if the 30MA fails to hold up when tested.

For now, the Dow remains in all out bull trend.
(Learn about what a "Leg" means in options trading)

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