Stock Market Analysis

Monday, March 25, 2013

Dow Continues Sideways Despite Better Data...

The Dow closed 64 points lower today despite better than expected economic data in this first trading day of Easter week.

Fundamentals
The past few US market sessions have been largely event driven by developments in the Eurozone. These developments caused great uncertainties in the way it will affect euro and world equities in general and have led the US market into a period of uncertainty despite better than expected forward looking economic data. Investors and traders are also seeking reasons to take temporary profit ahead of the Easter long weekend, leading to the willingness to sell that we saw today. Indeed, it has been a good run this year so far, as such, it is reasonable to expect traders and investors to take some short term profit in order to close this first quarter of the year on a beautiful note. Short term bond yields dropped a little indicating short term return to safety while options traders continue to keep total equities put call ratio around 0.9 in a more uncertain bid.

Technicals
Even though it was a negative day today, the Dow merely closed within the sideways trading range it has been in the past 10 trading days or so. As such, its really more of a sideways day rather than an outright bearish day. This sentiment is reflected both in the bond yields not echoing a decidedly bearish drop and total equities put call ratio not making the kind of surge it does in a true bearish day.  With good forward looking data acting as support, the Dow would most probably continue to move largely sideways until its 30MA catches up with it before moving any higher, just like it did back in February. This short sideways trend is however enough for quick swing trading system such as my Star Trading System to make a take a quick profit. In fact, we just took a quick 17% profit off put options on HUM today. (Stay on the correction side of the market with my Master's Stock Options Picks Service now!) However, the Dow is now due a good intermediate correction before any upside can remain healthy. As such, even if the Dow does continue upwards after its 30MA catches up, it might still collapse quickly into an intermediate correction.

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

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