Fundamentals
Despite a better than expected Empire State Index pointing towards continued economic growth, the US market opened deeply red and closed off its lows in yet another
high volatility day. Pressure came from Asia as the Nikkei225 made the biggest single day drop since 1987. The regional and global effects of the Japanese
nuclear incident is yet unknown, leading to a spike in volatility in the market. The VIX surged over
15% today as traders bet on more volatility. In fact, call options trading on the VIX formed more than two thirds of options trading volume today. Indeed,
as I said in my report to paid subscribers yesterday, this is going to be a week of volatility and depending on how the nuclear incident and the middle east
work out, this could get alot better or worse. Investors continue to rush back into the safety of bonds today as bond yields continue to drop across the board.
Technicals
Indeed, this is a time of extremely volatility and directional risk. The market can literally go anywhere now that it has breached the critical 50MA intermediate support.
As such, this is definitely a time for more volatility based play on delta neutral stance like the
Straddle. Next support level for the Dow is around the 11,500 level.
For now, the Dow turns a short term bear trend, intermediate bull trend and primary bull trend.
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