Stock Market Analysis

Monday, February 04, 2013

Pullback Begins... For Real

US market traded deeply in the red today with the Dow closing down by 129 points as reality of worsening economic data sets in.

US market has bucked the worse than expected streak of economic data (esp the worse than expected GDP and Jobs Report) the past week, remaining in grossly overbought condition, making it nearly impossible to spot good bullish entry points. However, reality sets in at last today as investors rushed out of equities back for the safety of bonds as I have predicted last week. This exodus is exactly what made spotting good bullish trades the past week so difficult; would you go bullish when you know the market is going to tank?

Adding fuel to the already negative opening was Factory Orders turning in worse than expected. Like I always said, economic data is like stock prices; they never go up in a straight line. Even in an economic recovery, economic data move in waves, improving for a few months and then pullback some before improving some more. I believe this is one of those short term volatile phases which we have seen so many times before. This outlook ties in nicely with my technical analysis conclusion that this is a short term pullback to the 30MA before the market can gather enough strength to move higher. So, how can you profit through options on such a "Moderate Bearish" outlook? Read my free tutorial on the Six Directional Outlooks in Options Trading.

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

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