Stock Market Analysis

Tuesday, March 05, 2013

Dow Makes New High

The Dow closed higher by 125 points today as the market continue to power forward despite the sequestration.

US market made a new high exactly as I have predicted last week with the Dow breaking above the 14,200 points level decisively. This came on the back of the much feared sequestration which puzzled many analysts. Why doesn't the sequestration have any effect on the market? This is because the market is still trading on the much better than expected ISM index that was recently released and that the market is releasing the energy pent up over the month long sideways volatile trend.

Yes, short term trends like this one has more to do with current issues and current technical sentiments than longer term effects like the sequestration. However, effects of such broadbased spending cut will be reflected in the market over time and I suspect it won't be long before it happens.

Investors continue to return to equities, lifting bond yields across the board in support of today's rally but options traders continue to keep total equities put call ratio above 1.1 in a decisive bearish vote. Such a split sentiment do cast a shadow on the current rally and I would exactly expect a few sideways or slightly negative days to follow as some of these short term traders sell according to their bearish sentiments.

For now, the Dow turns an all out bull trend.

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