It was a blood bath in the market today as the Dow collasped into its 8th straight down day, closing down by 265 points.
Fundamentals
It was a slaughter today in stock markets around the world following Monday's dismal US ISM Index. The recent economic data seems to suggest that the economic engine that was driving the recovery since 2009 seems to have disappeared all at once, leaving the US economy where it was back in 2009 once again. This brought back fears of a "Double Dip" recession which a lot of analysts seem to be talking about lately even though it has never quite happened before. Indeed, all economic recovery phase go through a period of uncertainty and volatility following the initial push. We saw the same thing back in the last economic crisis. However, its short term effects cannot be overlooked as it can last as long as a couple of years, like we saw back in 2004 to 2005. In fact, today's mixed retail sales numbers really didn't help improve sentiments. Investors rushed back into bonds, pushing bond yields to low levels unseen since Oct 2010. But its has yet to reach the kind of low level we saw back in August 2010 which resulted in a market turn around. Yes, when bond yields are too low to satisfy investors' investment objectives, they will return to equities which will always be selling at a discount then. The next hammer to drop would be this Friday's Jobs Report. If it turns out poorly, we could see this market go much lower. Yes, the economy is almost back down to where it was in 2009... would the stock market do so as well?
Technicals
The Dow made its first 8 straight down days today since Oct 2008 when the bear market at last found a bottom and came to a halt. In fact, 8 consecutive down days are so rare that the last time the Dow did so before Oct 2008 was when the market found a bottom during the last crisis at Sep 2001 and the last time before that was in August 1982, which also found a bottom! Yes, all three times over the past thirty years the Dow made 8 straight down days, the market finds a significant bottom. Could it happen again this time round? Odds are very good due to several reasons; Firstly, the Dow is now at the bottom of its volatile intermediate neutral channel and chances are still good that it will turn around from here. Secondly, the huge dip in the bond yields might encourage investors to return to equities. Thirdly, as I mentioned to paid subscribers yesterday, the VIX dropping in the same direction as the market almost always lead to a turn around within the next few days. Fourthly, the Dow is currently in a deep short term oversold condition so we should see at least a few small up days from tomorrow onwards.
For now, the Dow remains in a short term bear trend within an intermediate term neutral trend within a primary bull trend.
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Turn Around Imminent
The Dow continued into its 6th down day last Friday, closing the week lower by 537 points or 4.2%, governed largely by fears surrounding the US debt issue.
Indeed, last Friday's GDP and Chicago PMI did nothing to help the already negative sentiment in the market as both data turned in poorer than expected. Overall, economic data continue to be shaky along with the US debt issue, creating the perfect bearish atmosphere for the market. In fact, bond yields ditched strongly across the board as investors rushed back into the safety of bonds and options traders pushed the total equities put call ratio all the way up to 1.2 in favor of put options trading in a sudden surge. VIX also jumped 6.36% last Friday. However, everytime such a sudden change in all three indicators happen on a single day, it usually means a blow off day and that the trend might just turn around the very next trading day.
Indeed, on the technical front, the Dow also made a strong blow off day with volume surge and a bottom side hammer formation last Friday. This, together with all 3 of the above mentioned indicators displaying blow off behavior and the fact that the market is already down 6 straight days, we could see a turn around as soon as Monday itself. As I have mentioned last week, the Dow is now in a volatile sideways trend within a 12750 and 12000 channel. In fact, the 12000 support is reinforced by the 200MA itself as well. So there is no doubt a short term bottom is here.
For now, the Dow remains in a short term bear trend within an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.
Indeed, last Friday's GDP and Chicago PMI did nothing to help the already negative sentiment in the market as both data turned in poorer than expected. Overall, economic data continue to be shaky along with the US debt issue, creating the perfect bearish atmosphere for the market. In fact, bond yields ditched strongly across the board as investors rushed back into the safety of bonds and options traders pushed the total equities put call ratio all the way up to 1.2 in favor of put options trading in a sudden surge. VIX also jumped 6.36% last Friday. However, everytime such a sudden change in all three indicators happen on a single day, it usually means a blow off day and that the trend might just turn around the very next trading day.
Indeed, on the technical front, the Dow also made a strong blow off day with volume surge and a bottom side hammer formation last Friday. This, together with all 3 of the above mentioned indicators displaying blow off behavior and the fact that the market is already down 6 straight days, we could see a turn around as soon as Monday itself. As I have mentioned last week, the Dow is now in a volatile sideways trend within a 12750 and 12000 channel. In fact, the 12000 support is reinforced by the 200MA itself as well. So there is no doubt a short term bottom is here.
For now, the Dow remains in a short term bear trend within an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.
Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!
Exhaustion Sell-off?
The Dow sold off strongly by 198 points today as debt talks failed to make progress and economic data continue to turn in worse than expected.
Fundamentals
US market opened negative and sold off right off the gate as Durable Goods Orders disappointed by a mile. This is compounded by the disappointing Beige Book report showing slowing economic growth. By the muted response on the bond yields curve and the huge surge in total equities put call ratio, it does seems like today's sell off came mainly from traders and not institutional investors. This is the 4th straight down day in the US market and the Dow has lost a total of 421 points so far. Lets see if tomorrow's Jobless Claims can surprise positively and stall this freefall. Analysts are expecting a worse number this week so anything just slightly higher than last week would amount to a positive surprise... shouldn't be a hard thing to do.
Technicals
The Dow revisited its 30MA as I have expected in yesterday's email to paid subscribers. However, what was surprising was that it actually broke and closed below both the 30MA and 50MA. Good thing is that it didn't close low enough to constitute a significant downside breakout of both critical short term support levels. Today's huge fall along with the surge in trading volume could amount to a blow off, so we should see a positive day tomorrow. However, lets not forget that we are currently in an intermediate neutral trend, one which has not proven itself capable of turning back up again, as such, any travel within the 12750 and 12000 remains reasonable for the Dow. This 4 days free fall has broken the previous reversal pattern, leaving the intermediate trend once again in neutral territory. This is looking more and more like the big sideways market of 2004. Perhaps such a year of limbo is a must for all recovering markets following every economic crisis.
For now, the Dow turns a short term bear trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.
Fundamentals
US market opened negative and sold off right off the gate as Durable Goods Orders disappointed by a mile. This is compounded by the disappointing Beige Book report showing slowing economic growth. By the muted response on the bond yields curve and the huge surge in total equities put call ratio, it does seems like today's sell off came mainly from traders and not institutional investors. This is the 4th straight down day in the US market and the Dow has lost a total of 421 points so far. Lets see if tomorrow's Jobless Claims can surprise positively and stall this freefall. Analysts are expecting a worse number this week so anything just slightly higher than last week would amount to a positive surprise... shouldn't be a hard thing to do.
Technicals
The Dow revisited its 30MA as I have expected in yesterday's email to paid subscribers. However, what was surprising was that it actually broke and closed below both the 30MA and 50MA. Good thing is that it didn't close low enough to constitute a significant downside breakout of both critical short term support levels. Today's huge fall along with the surge in trading volume could amount to a blow off, so we should see a positive day tomorrow. However, lets not forget that we are currently in an intermediate neutral trend, one which has not proven itself capable of turning back up again, as such, any travel within the 12750 and 12000 remains reasonable for the Dow. This 4 days free fall has broken the previous reversal pattern, leaving the intermediate trend once again in neutral territory. This is looking more and more like the big sideways market of 2004. Perhaps such a year of limbo is a must for all recovering markets following every economic crisis.
For now, the Dow turns a short term bear trend in an intermediate term neutral trend within a primary bull trend.
My Market Analysis Sent Straight Into Your Email Daily For Only $5/Month! **My analysis will only be posted here once every other day.
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