Stock Market Analysis

Wednesday, January 30, 2013

Start of Short Term Pullback...

US market went south today on far worse than expected GDP numbers with the Dow closing down by 44 points.

Investors and traders held off their selling on the worse than expected GDP to see if the FOMC announcement would introduce any positive surprises... which of course didn't happen. The Feds did what everyone knew they would to keep largely everything unchanged, as if the meeting never happened at all. Investors and traders resumed their GDP sell off for the rest of the day following the FOMC announcement. The VIX continue to rise on the higher volatility and options traders continued to keep total equities put call ratio above 0.9, signifying uncertainty.

All of these suggest that this might be the start of that overbought pullback that I have been talking about all week. Yes, without a good retreat back to the 30MA level, the Dow will continue to be in such an overbought position that it is hard for investors to buy into anymore. A good retreat will take the Dow off short term overbought condition and set up better entry points which encourages the kind of buying that would help this bull trend progress in a healthy manner.

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

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