Stock Market Analysis

Monday, June 24, 2013

Significant Buying Into Weakness

The Dow closed down by 139 points today as the intermediate correction goes underway, not only in the US market but across the globe as well.

Even though it was a decidedly bearish day in the market, there were actually clear signal that institutional investors were buying into the weakness as bond yields rose across the board and lifted the market off its lows once again by the end of the day. Options traders continued to keep total equities put call ratio above par in favor of put options trading today in support of the short term bears.

Indeed, this is looking more and more like a classic intermediate correction instead of something that will turn into an all out primary bear trend. In an intermediate correction, you will always see accumulation into weaknesses in anticipation of the resuming of the bull trend and that was exactly what we saw today. Furthermore, there were also clear strength coming in from the manufacturing data from many states so far, which may point to a better ISM index next month. However, that doesn't mean that the intermediate correction is ready to just turn around right now. We should see one more significant leg downwards with support around 14,000 before this intermediate correction calls its end.

For now, the Dow turns a short term bear trend within an intermediate neutral trend and primary bull trend.

Thursday, June 20, 2013

Rude Awakening...

Just right after the Dow showed the first sign for recovering from yet another attempt at an intermediate correction, it slumped 353 points in the biggest single day slump of the year, took out the June lows, and confirmed the intermediate correction.

Yes, just when we all thought the intermediate correction has once again eluded us, it returned, with a bang! Indeed, the FOMC announcement and today's poor showing on the jobless claims overshadowed a much better than expected Philley Fed. The VIX shot to its highest level for the year as the total equities put call ratio surged strongly in favor of put options trading. However, bond yields actually ROSE across the board, suggesting that investors actually rushed into this weakness, perhaps in an attempt at bargain hunting and in anticipation of a fake out?

Well, the behavior of the Dow this time round is completely different from all the fakeouts all year so far. This is definitely an intermediate correction setup, not a fakeout setup. However, since its such a big jump and that tomorrow is Quadruple Witching day, we can expect a limited trading range day tomorrow which may even be slightly positive. However, it is unlikely that the Dow can turn around from here and once again sit atop its 30MA. This is like a Brazilian Jujitsu (BJJ) situation where a small guy tries to escape the full mounting of a much bigger guy in order to get on top of him. The 30MA is now that much bigger guy for the Dow.

An intermediate correction is a good thing actually as it is normally quick and hard and sets up better entry points in order for the market to go further higher in a healthy manner.

For now, the Dow turns a short term bear trend within an intermediate neutral trend and primary bull trend.

Wednesday, June 19, 2013

Dow Survived Once Again!

I was correct to be careful to call an intermediate correction last week and wanted to see the Dow take out the June low in order to confirm one. The Dow turned around before beating the June low and is now once again above its 30MA in continuation of its bullish trend. Indeed, the market has been extremely resilient and has resisted every attempt at an intermediate correction all year so far.

Good thing my Ride the Flow system has managed to continue riding this bull trend for an overall portfolio gain of 7%. Check my Ride the Flow system!

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

Tuesday, June 11, 2013

Start Of Intermediate Correction?

The Dow took a 116 points hit today as sales data disappoints.

The US market has amazingly bucked every single disappointing heavyweight economic data over the past month so far but is at last showing some real cracks at last. The disappointment in the sales data managed to dent the market right off the gate but amazingly, bargain hunting stepped in almost immediately once again, bringing the Dow back into the black briefly towards midday. However, this time round, bargain hunters failed to buck the economic data once again as buying succumbed to selling for the rest of the day. Options traders continue to keep total equities put call ratio in the uncertain range like they did since 4 June and investors depressed long term bond yields as they returned to the safety of bonds.

Once again, everything points towards the long awaited intermediate correction. This is also the first time the Dow has failed twice at the 30MA this year so far. However, the Dow has bucked the technicals everytime over the past few months so I am going to be cautious with calling this the start of the intermediate correction. The buying we saw early today and the post market index futures pointing sharply upwards also suggest the existence of significant bargain hunting which could potentially turn things around if they get their way tomorrow. As such, I will want to see the Dow break the June 6 low before calling this the start of the intermediate correction.

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