Stock Market Analysis

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.

Fundamentals
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.

Technicals
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.

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