Stock Market Analysis

Thursday, September 27, 2012

Dow Gains on Jobless Claims

The Dow gained 72 points today as investors cheered a much better than expected Jobless Claims.

A wave of optimism hit global markets today before US market opening as almost all major markets ended positive in Asia. This led to index futures (learn more about index futures) pointing higher in the morning before opening. Jobless Claims released at 8:30am reinforced this optimism by turning in way lower than expected and clouded any pessimism surrounding a downwards revision in Q2 GDP released at the same time. Obviously investors are more concerned about the jobs market than the GDP right now. Long term bond yields rose as investors reallocate longer term capital back into equities today. Options traders took total equities put call ratio back below the 0.9 uncertain range today but that's only one day so its nothing to read into too much.

The Dow took a turn around today before it reaches its 30MA but if you take a look at the S&P500, it has already reached its 30MA and today is a classic successful retest of its 30MA. This has lifted the Dow and the Nasdaq as well. So far, market movement has been classic textbook. With this 30MA turn around and the Dow (and SP500 of course) in short term oversold condition, market inclination is now to upside.

For now, the Dow remains in a short term bear trend within an intermediate and primary bull trend.

Tuesday, September 25, 2012

Dow Retreats As Expected...

The Dow retreated towards its 30MA today just like I said it would yesterday, closing down by 101 points despite much better than expected economic data.

What was a somewhat positive day ended up in disappointment as the sudden dip in crude oil prices took the market down with it. However, was the market as strong to start with in the first place? With such a huge slew of positive economic data, the Dow barely traded upwards by 0.5%. There was clearly a lot of resistance to upside during that morning session. For the first time in a long time, options traders also echoed this uncertainty by pushing total equities put call ratio above 0.9 while investors rushed for the safety of bonds, depressing bond yields across the board. All in all, it was a rush for safety today.

No surprise today as the Dow decided to revisit its 30MA as I predicted it will yesterday. Yes, there were plenty of fundamental reasons that seemed "unpredictable" leading to today's slump but all in all, it only happened because investors and traders were already looking for reasons to sell out of their profitable positions days before today's event. That was the only reason why I was able to "predict" today's drop despite not knowing that crude oil is going to take a hit on the Iranian issues today. That is what technical analysis is all about, reading into the minds of investors and traders to understand what they might do next. With the Dow still a distance from its 30MA, the market is expected to continue to be under pressure for the rest of the week.

In fact, my stock options picks subscribers and I already pre-positioned us with two good bearish picks a few days ago in anticipation of this drop and one of the positions has already clocked more than 50% profit in just 2 days of holding it. Will report on results after closing that trade.

For now, the Dow turns short term bear trend within an intermediate and primary bull trend.

Monday, September 24, 2012

Dow Sideways As Expected

Welcome back from the weekend!

No surprises today as the Dow continues its sideways movement, closing slightly negative by 20 points. Like I said last Thursday, the Dow is most likely going to continue sideways into this week and even revisit its 30MA before it can muster enough energy to move upwards somemore. This mustering of energy usually comes in one of two ways; Retreating to the 30MA or moving sideways until the 30MA catches up. Economic numbers continue to be largely mixed with a touch of disappointment, adding possibility to the retreat to the 30MA. This is compounded by the fact that some investors are returning to the safety of bonds as we can see from the selloff towards the end of the day as well as the dip in the longer term bond yields. Options traders continue to suggest a general bull trend by keeping total equities put call ratio below 0.9, something which I agree with.

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

Thursday, September 20, 2012

Dow Continues Sideways As Expected

The Dow continued to move sideways as expected, closing marginally upwards by 18 points.

It was another day of mixed economic data and mixed trading. Jobless claims turned in worse than expected, leading to a negative opening but a positive surprise on the Philley Fed put a stop to the fall and started turning things around despite a worse than expected Leading Indicators. Market begun a slow but steady climb for the rest of the day, ending slightly positive. Tomorrow's Quadruple Witching day would no doubt end up in a volatile day with big intraday movement but very limited net movement. Options traders continue to keep total equities put call ratio below 0.9, continuing the bullish sentiment.

No surprise today as the Dow continued to move sideways today. As I mentioned yesterday, the Dow is most likely going to move sideways and even slightly negative for the rest of the week. In fact, it is most likely that the Dow is going to continue largely sideways or even pull back downwards a little next week to meet the 30MA before anymore upside can be expected. In fact, a re-test of the 13,300 points resistance level could even be in order before further upside. This means that any weakness continues to be great points for entry.

See how we made 96% profit on SNDK yesterday even in this volatile market condition at

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

Wednesday, September 19, 2012

Will Global Unrest Impact US Market?

No surprise today as the Dow continued sideways on mixed housing data, closing marginally higher by 13 points. As I mentioned in my last post and in my email to paid subscribers, the market is going to be largely sideways or even slightly negative for the rest of the week leading up to this Friday's Quadruple Witching so we should not expect explosive action. However, it is still a great time to be buying on any weaknesses.

What about all the unrest in the middle east and in Asia? Surely that would affect the US market?

Yes, they would but in a GOOD way!

Surprising but true, the US economy has everything to gain from the current unrest, particularly in Asia. China and Japan owns a huge part of US debt and if they go to war, not only will capital be flowing towards the US since the euro zone is still very unstable, it will also depreciate those currencies and make it cheaper for US to repay it's debt to China and Japan! That is why the US market is still going so strongly despite all these unrest.

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

Monday, September 17, 2012

Dow Retreats... As Expected...

The Dow retreated 40 points today on worse than expected Empire State Index but if you have followed my blog, you know what I've always said; Its normal to have a few sideways or slightly negative days following every single day rallies. So the Empire State Index today merely provided the reason for a small, insignificant retreat.

As I have predicted in my post last Wednesday, the Dow did its real breakout following the FOMC announcement indeed. All the tell tale signs were there before the release so there was no magic involved. This breakout also broke the Dow out of an extremely volatile pattern we saw in the March to August period and would lead the market much higher from here. However, for the short term, with the huge single day rally and the Dow in short term overbought condition, we should still witness plenty of profit taking for the rest of the week leading up to Friday's Quadruple Witching day.

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

Wednesday, September 12, 2012

Dow Stages Mini-Breakout...

The Dow staged a mini-breakout today, closing higher by 9 points ahead of tomorrow's FOMC announcement.

A lot of optimism in the market these couple of days indeed. Like I said last week, investors seem to know that Uncle Ben's going to do something positively surprising in tomorrow's FOMC announcement and has been buying into every bit of weakness so far. In fact, it is not rocket science to predict that Uncle Ben, being under pressure from the media over his lack of action and under pressure from the current Presidential campaign, might come up with some candies to sweeten up the economy a little bit even if it is against his own will. It is these "candies" that investors have been prepositioning for over the past two days. Bond yields surged across the board in response to the exodus from bonds back into equities and options traders continue to keep total equities put call ratio below 0.8, the kind of pattern we get in strong bull markets. With economic numbers also looking better over the past few days, there is little doubt that there is now more upside pressure than downside pressure in the market.

The Dow seems to have ended the few sideways days that always follow big single day rallies and made a small breakout of the powerful 13,300 points resistance level today. In fact, it did so with a higher high and a higher low, which again is an extremely bullish sign. However, the problem is that this "breakout" is so insignificant that it cannot be considered a true breakout at all. Ideally, a breakout should be one strong candle on powerful volume, suggesting a complete psychological breakout. However, that was not the case today. Even though it made a higher intraday high than the May high which set the 13,300 points resistance level, it is still under its gravity as is clear from the way the Dow closed much lower by the end of the day. However, fact remains that now, a topside breakout still stands as a higher probability than failing once again at this level.

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

Monday, September 10, 2012

Profit Taking Continues...

A volatile first day in the market with no major economic releases and plenty of profit taking like I predicted last week. Indeed, always expect a few days or sideways or slightly negative days to follow huge single day rallies. This week's FOMC announcement may contain some good news that will allow the Dow to break out of the sideways-slightly-negative-days into new highs especially with uncle Ben now under tremendous pressure and doubt. Even though it was a slightly negative close, investors are still seen moving slowly back into equities, raising bond yields slightly across the board. Options traders continue to reflect a decisive bullish sentiment, keeping total equities put call ratio below 0.8 in favor of call options trading. This is the kind of ratio you get in strong bull trends.

The current 13,300 points level is an extremely strong resistance level where the Dow failed at last month. Failing once again at this level would create a head and shoulders formation that can prove to be very nasty. However, looking at both the fundamentals and the technicals, chances still favor a bullish breakout this time round.

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

Thursday, September 06, 2012

Dow Rallies On Strong Jobless Claims

The Dow made an explosive 244 points gain on better than expected jobless claims.

Jobless claims made a surprising dip this week, turning in at 365K versus last week's 377K. This is lower than the consensus of 370K and definitely cast a positive light ahead of tomorrow's Jobs Report. In fact, as I mentioned two days ago, investors have already started buying since two days ago as if they knew something positive is going to happen, remember? This might be it. However, the reaction to today's number is so strong that it has probably priced in much of the optimistic outcome of tomorrow's Jobs Report and might lead to some profit taking no matter how positive Jobs Report really turn out to be.

The Dow rallied from beneath its 30MA just like I predicted it to two days ago. Indeed, as I mentioned, the volatile bull pattern so far is a strong one with no indications to the contrary. Technicals and Fundamentals tied in very nicely once again in the continuation of this pattern. As I've always said, a few days of profit taking is to be expected following such strong single day rallies no matter what the fundamentals say. So expect a few sideways or slightly negative days to follow.

For now, the Dow turns an all out bull trend.

Tuesday, September 04, 2012

Market Sells Off On Dismal ISM Index

Welcome back from the long weekend! The Dow took a 54 points hit on this first trading day of September on disappointing ISM Index.

Investors strangely bought strongly last Friday ahead of the long weekend and the first big economic data to hit coming out of the long weekend; ISM Index. It was as though investors were expecting a better showing after last month's dismal below 50 indication on the ISM index. Indeed, consensus are for the ISM index to climb back up to the 50 line which it failed to do so today. Market sold off hard right after the ISM index turned in at 49.6, yet another reading below 50 indicating contraction in the manufacturing sector, and a lower reading than last month's 49.8. It was truly a dismal report which got short term traders running in the morning while bargain hunting investors took over in the afternoon, taking the NASDAQ100 back up to positive while closing the Dow and SP500 way off their intraday lows. Bond yields also rose slightly across the board as investors bought into equities on the weakness as if they already knew in advance the Fed might do something about the continued weakness... and they just might...

The trading action today as well as the poor ISM index continues to support this volatile bull trend pattern. In a volatile bull trend, economic data usually behave extremely volatile with investors buying into each showing of weakness after short term sell-offs, creating the kind of big spikey waves which goes in a generally upwards direction. This is exactly what volatile bull markets are all about. Over the past few months, the Dow has reversed upwards after staying a couple of days beneath its 30MA and with the way investors are bargain hunting into the weakness, there is no reason to believe that it will be any different this time round.

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