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.