Stock Market Analysis

Thursday, July 05, 2012

Dow Drops 47 Points Despite Better Jobless Claims

The Dow dropped 47 points today despite better than expected Jobless Claims.

Fundamentals
The market continue to succumb to profit taking pressure today despite a much better than expected Jobless Claims numbers. Yes, despite a terrible ISM reading, the housing and jobs market seems to be sending out some very healthy signal and that forms the fundamental needed for some upside speculation. In fact, the total equities put call ratio also turned in its most bullish level since April as options traders, who has been uncertain about the market direction since April, turn decidedly bullish at last. Bond yields dropped slightly across the board as investors continue to take profit today and move back slightly into bonds. Overall, fundamentals have begun to improve both in the US and the Euro zone and holds great promise for the mid to long term.


Technicals
No surprise today as I have expected the Dow to move largely sideways since Monday due to last Friday huge rally. However, it is clear that the market is still extremely bullish especially since it survived such a terrible ISM reading. However, the Dow is still short term overbought on relatively low trading volume. This means that we could still see it pullback slightly to muster some "energy" before making new highs. However, with the clearly bullish setup, every pullback marks great bullish entry points.

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

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