Stock Market Analysis

Monday, April 15, 2013

Multiple Disasters Strike US Market...

The Dow took a huge 265 points hit today as economic data continues to disappoint and as new terrorism hits homeland.

Fundamentals
A slew of really bad news hit the press today, giving the US market its most powerful blow so far this year. A tragedy on homeland America struck the Boston marathon as terrorism rears its ugly head once again, rekindling terrorism fears. As though that is not bad enough news, the Empire State Index turned in less than half of expectation at only 3.05, a huge drop from last month's 9.24! This suggests a significant slow down in the manufacturing sector which demands attention. As if that is not enough, the Housing Market Index also slummed from 44 to 42. The housing market is an extremely important one in this recovery since it was one of the main reason for this economic downturn. It had been on the up and up almost all of last year but has been on the down and down all of this year. All of these culminates to the biggest single day drop for the year of 265 points. Does this mean the start of the intermediate correction that I have been expecting?

Technicals
Despite worsening economic data, the Dow continued to be strong last week and at last gave in to the pressures triggered by the fundamentals above today. Does this mean the start of an intermediate correction? Well, it is very likely even though we should see a few slightly positive but largely sideways days from here onwards as some bargain hunters step in. How the Dow hold up around the 30MA right now would tell me if this is the start of the intermediate correction. If the Dow should fall under and stay under the 30MA for 2 days, that would signal me to prepare for shorts.

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

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