Stock Market Analysis

Monday, July 29, 2013

Dow Continues Sideways

The Dow closed down by 36 points today as economic data continues its volatility.

Fundamentals
With global markets closing largely negative, the US market was also set up for a lower opening Monday morning. What little bargain hunting that took place after that was obliterated by a sell out after Pending Home Sales and Dallas Fed both turned in worse than expected. Investors were also rightfully cautious today in taking short term profit off the table as this first week of August is packed full of heavyweight economic data capable of relieving them of the profits that they have made over the past month. However, in contrast to an all out bearish day, the bargain hunting actually resulted in bond yields rising across the board and total equities put call ratio falling in favor of call options trading.

Technicals
Today is largely a sideways day despite being the first significant down day for weeks. However, a negative day following last Friday's hangman candle (a candle occurring at the top of a trend with small body and long bottom shadow) is a cause for concern. The intermediate correction in May also started with a couple of hangman candles around the May peak. However, even if the Dow pulls back down from here, it is unlikely to complete a double top as double tops rarely happen after the second peak manages to close higher than the first peak like it did this time round. What is most likely to happen is for the Dow to test the 30MA and then rebound and resume the bull trend.

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

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