Stock Market Analysis

Monday, February 25, 2013

Off To a Bad Start...

US market opened to a bad start on Monday with the Dow dropping over 200 points in a single day, its biggest single day drop in months.

What started out as a slightly positive opening quickly gave way as economic data continued to pour in worse than expected. Both Dallas and Chicago Fed turned in worse than expected and with the Sequestration around the corner, investors and traders ran straight for safety with nothing positive to lean on.

VIX surged skyhigh as options volatility surged skyhigh, total equities put call ratio also surged above 1.1 and bond yields collasped across the board as investors rushed back to the safey of bonds.

All of these tell me once again that today's pullback might be overdone once again. Everytime all of these indicators go all crazy in a single day, particularly around the 30MA, its usually a fake-out. However, we will let tomorrow's market tell us that. If it follows up strongly tomorrow and close significantly lower than the 30MA, then we could be witnessing the start of a retreat all the way down to the 50MA. However, odds still favor a turn around into new highs rather than a full scale retreat from this level.

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

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