Stock Market Analysis

Monday, March 11, 2013

Pending Pullback?

The Dow made its 7th straight gain today, closing higher by 50 points.

Fundamentals
Investors and traders continue to push US market into new highs today following last Friday's much better than expected Jobs Report. Indeed, current economic data seems to be getting better and better inline with the economic recovery scenario. The longer term effects of the sequestration seems to be ignored by the market for now. However, it is also clear from the total equities put call ratio and bond yields that investors and traders has already slowed down on the bullish side significantly. This could lead to a little short term profit taking ahead of this Friday's quadruple witching day.

Technicals
With the 7th straight up day and the Dow being in deep short term overbought condition, it would not be surprising to see the Dow go largely sideways or pullback slightly from here. Options traders has already begun moving back towards put options, pushing total equities put call ratio higher, investors has already stopped moving back into equities from bonds in a big way and trading volume has also dropped significantly. Indeed, even in a strong bullish trend such as this one, a slight pullback in order to digest such overbought sentiment need to happen in order to encourage more buying.

For now, the Dow remains in an all out bull trend.

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