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.
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.
posted by Jason Ng at 5:55 PM
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