Stock Market Analysis

Wednesday, October 17, 2012

Bulls Buy Into Weakness on Housing Data

The Dow moved sideways today, gaining marginally by 2 points, rescued by much better than expected housing data.

Fundamentals
Housing starts hit a 4 year high today suggesting continued recovery in the housing sector. Recovery in the housing sector is extremely important in the overall economic recovery scenario and has encouraged the bulls to take the market back up to par from a negative opening. There were some profit taking in the afternoon but the bulls are strong enough to buy into the weakness, which is definitely encouraging. However, lets not forget that the market is still overdue a good intermediate correction so chances of this rally making a significant new high can be low. Bond yields surged across the board as investors rushed back into equities on the housing data, offsetting the early profit taking. Options traders also kept total equities put call ratio below 0.9 for a third day in a row, confirming the current bullish sentiment... for now.

Technicals
The Dow continued the March - May pattern today as I have expected. A little bit of sideways movement is definitely to be expected after the good two day rally it just had. However, the market still looks set to make that triple top before the intermediate correction so it is not time yet to be overly committed to upside.

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

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