Stock Market Analysis

Monday, April 22, 2013

Dow Struggles Against Worsening Economic Data...

The Dow closed higher by 20 points today despite worsening economic data.

Fundamentals
US market continued to struggle today against worsening economic data even after the impact of the Boston bombing begins to subside. Economic data has generally turned in worse this month so far; the poorer than expected Chicago Fed today led the market to a volatile opening that saw the Dow sink almost 100 points lower in the morning. However, bargain hunting stepped in quickly and brought the market back up to par by the end of the day. Economic data also hit periods of volatility even in a recovery, just like stock prices, and we are clearly in one such period. Options traders continued to express short term uncertainty by keeping total equities put call ratio around par while yields on some midterm bonds drop as some investors reallocate to the safety of bonds. Overall, even though it is technically a positive day, the undercurrent is definitely anything but positive. Uncertainty continues to be the theme for the short term.

Technicals
The Dow made nothing more than a sideways day today. It is now crawling dangerously beneath its 30MA which can easily and quickly sink downwards into an intermediate correction and it takes just one negative day to do that. With the market futures already pointing downwards, chances are high that tomorrow would be that negative day. If it is, then there is little doubt left that this might be the start of the intermediate correction that I have been talking about for a couple of weeks.

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

Mini options were launched in the US market last week. Learn more about what mini options are and the unique opportunities that it presents at my free Mini Options tutorial.

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