Stock Market Analysis

Wednesday, August 22, 2012

Dow Pullback Continues

The Dow continued downwards today as home sales data failed to impress, closing lower by 30 points.

Fundamentals
Existing home sales failed to live up to expectations today even though it was higher than last month. This led to a huge sell off after a slightly negative opening. Indeed, ever since the jobs report, investors have been waiting for more good news on the economic front in order for them to keep buying but it never came. However, sentiments turned around following the FOMC minutes in the afternoon suggesting the possibility of more easing in the near future. Bargain hunters jumped in on the lower prices but failed to bring the market back up positive before closing as investors were rushing out of the equities market at last after holding out for so long, into the safety of bonds. Bond yields dropped across the board as investors sell off to bargain hunters as options traders continue to be largely uncertain, keeping total equities put call ratio near par. These indicators completely support my long held view of longer term bull trend (due to possible easing) with current volatility (due to volatilities in global market and economic data due to toxic clearing).

Techncials
No surprise today as the pullback continues following my report to paid subscribers yesterday. However, the good thing about this pullback is that it has held off long enough for the Dow's 30MA to actually catch up quite a bit and is now once again in a very healthy distance with the market just off short term overbought condition. This means that this bull may resume sooner than we think and that might coincide with all that possible policy easing.

For now, the Dow remained in short term neutral trend within an intermediate and primary bull trend.

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