Intermediate Correction Coming?
The Dow closed lower by 43 points as investors turn their eyes on issues in the Eurozone once again.
Fundamentals
Major global markets ended Monday in the red before US market opened today due to worries surrounding the Cyprus bailout. This led to a sharply negative US market opening which was compounded by a worse than expected Housing Market Index. Investors rushed back to the safety of bonds, depressing bond yields across the board, options traders kept total equities put call ratio above 0.9 in a vote for uncertainty and my Star Trading System gave us our first short term bearish trade of the year today. Expect the rest of the week to be more volatile due to the FOMC meeting.
Technicals
The Cyprus issue was truly a good coincidence to kick start this short term pullback that I have predicted last week. No bull trends go straight up no matter how strong. It will always go into short term overbought condition and then pullback a little to take itself out of short term overbought condition and set up better entry points that pushes the market to new highs. However, we do need to be on the look out for the possibility of this pullback turning into an intermediate correction. The market is currently at the point where an intermediate correction does seem to be in order before the market can make anymore new highs. For now, a retest of the 30MA seem the most probable. The quality of that retest will tell us if this is going to turn into an intermediate correction rather than just a pullback.
For now, the Dow remains in all out bull trend.
Fundamentals
Major global markets ended Monday in the red before US market opened today due to worries surrounding the Cyprus bailout. This led to a sharply negative US market opening which was compounded by a worse than expected Housing Market Index. Investors rushed back to the safety of bonds, depressing bond yields across the board, options traders kept total equities put call ratio above 0.9 in a vote for uncertainty and my Star Trading System gave us our first short term bearish trade of the year today. Expect the rest of the week to be more volatile due to the FOMC meeting.
Technicals
The Cyprus issue was truly a good coincidence to kick start this short term pullback that I have predicted last week. No bull trends go straight up no matter how strong. It will always go into short term overbought condition and then pullback a little to take itself out of short term overbought condition and set up better entry points that pushes the market to new highs. However, we do need to be on the look out for the possibility of this pullback turning into an intermediate correction. The market is currently at the point where an intermediate correction does seem to be in order before the market can make anymore new highs. For now, a retest of the 30MA seem the most probable. The quality of that retest will tell us if this is going to turn into an intermediate correction rather than just a pullback.
For now, the Dow remains in all out bull trend.
posted by Jason Ng at 3:56 PM
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