Stock Market Analysis

Wednesday, August 08, 2012

Dow Continues Bullishness

The Dow moved sideways today, gaining 7 points as buying dries up.

Fundamentals
Its a fairly quiet day today as excitement surrounding the last few economic releases start to dry up. In fact, market opened in the red today but went back up to breakeven on bargain hunting. Investors are buying into weakness right now as bond yields continue to rise on the exodus from safety into risk. It has been a volatile few weeks as the Dow finds itself once again at the door steps of March/May high. Options traders continue to be mainly bullish, keeping total equities put call ratio way below 0.9 suggesting strong call options trading. Fundamentals in the US and Euro zone continues to be shaky and we can be sure that any good news will result in a surge and every bad news a dip, resulting in the continuation of this volatile bull trend. This is the time to have a longer perspective and invest for the longer term. The current volatility is only good for the most nimble traders.

Technicals
The Dow looks set to revisit its 30MA from here onwards once again as I have expected. However, the current strength might have broken the serial bearish divergence that I mentioned last week. On the weekly chart, the Dow looks to be on a classic textbook recovery out of an intermediate correction. If this pattern holds, the Dow should break the March/May high. Odds now favor such a scenario on a successful 30MA retest.

For now, the Dow turns all out bull trend.

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