Stock Market Analysis

Thursday, January 24, 2013

Start of Pullback?

US market closed mixed today due to earnings despite better than expected economic data.

Fundamentals
US market ended in an extremely split fashion today with the Dow closing up by 46 points and the Nasdaq composite closing down by 23 points. This was due largely to poor showing in earnings on the tech side and better than expected economic data. Both jobless claims and leading indicators turned in much better than expected which helped the broader market combat pressure from tech stocks. However, traders continue to be uncertain and cautious with the market trading largely with a sense of being over extended. Options traders continue to keep total equities put call ratio around 0.9, which is typical of an uncertain market. The VIX also turned in higher today in support of a short term move to downside. As a general leading indicator for the broader market, if the Nasdaq persists lower tomorrow, we could see the broader market go into that healthy short term pullback that we have been waiting for.

Technicals
The Dow continues to move further into short term over bought territory today but we could actually see a short term pullback to perhaps the 30MA level start within the next few days. Most times when the VIX close opposite to the direction of the Dow, it leads the Dow into that direction for the short term. However, such a pullback is not a dangerous but a healthy one. Without a good pullback to set up better entry points, buying will dry up and the market will stall.

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

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