Daily US Stock Market Fundamental & Technical Analysis

Happy Jolly Day!

2009-12-01T17:25:00.000-08:00

Investors cheered a better than expected store sale and auto sale today, closing the Dow up 126 points.

Index futures were already sky high prior to market opening today as store sales and auto sales (see Stock Market Calendar) beat expectations. Investors also came to the realisation that the Dubai World incident really isn't as big a deal as the media made it to be. The Dow zipped right up upon opening and traded flat for the rest of the day. In fact, investors were so optimistic that they looked past the ISM index which failed to beat expectations. Indeed, like I mentioned yesterday, some volatility in the ISM index at this level is to be expected and nothing to be made a fuss about.

Even through today's rally still kept the Dow within a narrow short term neutral channel, the probability of a topside breakout is now extremely high with the Dow way off short term overbought condition with short term bullish momentum rising. The 30MA is once again at a comfortably close proximity and could guide the Dow higher from here onwards.

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

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Chicago PMI Beats Expectations...

2009-11-30T17:30:00.000-08:00

The Dow gained marginally by 35 points today as the Chicago PMI beat expectations.

The Chicago PMI (Purchasing Manager's Index) turned in better than expected today at 56.1 vs consensus of 53. Readings above 50 suggest an expanding economy while readings below 50 suggest a contracting economy. What today's 56.1 tells us is that the US economy has stepped out of recession and is expanding at an accelerating pace. Tomorrow's ISM index would be the real heavyweight indicator of how the economy is doing. So far, the ISM index has recovered to almost pre-recession levels. Investors should be prepared for some volatility.

So far this month, the Dow has been trading largely sideways. I speculated that it will retreat back to its 30MA before moving higher but it seems like it prefers to wait for its 30MA to catch up on it instead. Still, we need to see the Dow break out of its current range before any short term trading is possible.

For now, the Dow has turned short term neutral trend within an intermediate and long term bull trend.

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Heavy Weight Week Again...

2009-11-29T16:21:00.001-08:00

Welcome back! Hope you had a great Thanksgiving weekend!

One reason why professionals like myself are reluctant to put on new positions prior to long weekends is because anything can happen over so many days. That was what happened this time time with the Dubai credit crisis. Dubai's sovereign fund requested for a suspension of debts just a few hours after issuing their new bonds in a move that tells the whole world that they have overspent like a lady in a Prada shop. Stock markets drop all over the world in fear of a new "financial crisis" arising out of this event. The Dow also dropped by 154 points in last Friday's half day trading.

Seriously, the Dubai incident isn't a big deal for two reasons; Firstly, not every country in the world are invested in Dubai in a big way. Secondly, its a debt suspension, not yet a debt default. In fact, the Dow is going to retreat down to retest the 10,000 points level again as I have mentioned before and it might as well have been on the back of an event such as this one. The Dow has been secretly wearing off most of its short term overbought condition last week over the weak trading volume which leads me to think that a retreat may be only down to the 30 MA instead of all the way down to the 10,000 level. Either way, the direction is still upwards for now on the intermediate and long term basis and I don't see anything that threatens it.

This is the first week of December and yes, a heavyweight week in terms of economic numbers (see Stock Market Calendar). Once again, we will get the ISM index and the Jobs Report this week which will certainly have much more impact than the Dubai incident.

For now, the Dow remains in a all out bull trend.

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Happy ThanksGiving!

2009-11-25T19:26:00.000-08:00

Its been a light trading week this week so far and I hadn't been writing as I am holidaying in Japan for this Thanksgiving. Will be back writing again next week.

HAPPY THANKSGIVING!

Suspicious Start for the Week

2009-11-23T17:39:00.000-08:00

What a great start to thanksgiving week with the Dow gaining 132 points on encouraging Durable goods order and Jobless Claims.

The US Market launched to a great start as Durable goods orders and jobless claims beat expectations (see Stock Market Calendar), fuelling the recovery scenario. This extreme optimism was echoed by the total equities Put Call Ratio ditching by 25 points today from almost par to extreme call options trading. However, what was lacking today was volume. Volume was light as expected of the thanksgiving week and such aggressive buying on both the stocks and options front tells me that perhaps some institutions are trying to create a rush in this thanksgiving week. Whether retail investors and traders take the bait is still left to be answered but there is no doubt that today's rally once again pushed the Dow back up to that uncomfortable, shaky, peak. From the trading patterns, I have no doubt that investors and institutions are still trying to take profit prior to the holiday but wants to do so in style.

From the lack of volume going into today's rally and sudden surge in call options trading, I have no doubt that the tide will turn and the 10,000 points level retested.

For now, the Dow remains in a all out bull trend.

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Thanksgiving Week!

2009-11-23T03:05:00.000-08:00

Welcome to Thanksgiving week!

Yes, its going to be a holiday shortened week this week with Thanksgiving on Thursday and a half day market on Friday (see Stock Market Calendar). Trading volume is expected to be light this week as investors and traders go on their seasonal holiday. Expect to see some profit taking ahead of Thanksgiving as traders traditionally take some profit to finance their holidays. Santa Claus rally? Doesn't exist anymore.

For now, the Dow remains in an all out bull trend.

Dow Starts Retreat

2009-11-19T20:25:00.000-08:00

As expected, the Dow started its retreat, closing down 93 points at 10332 points despite optimistic forward looking data.

Both leading indicators and Philley Fed data continue to support a recovering market going forward (see Stock Market Calendar). In fact, Philley Fed outlook has not been higher even during the pre-crisis years! However, as a technically driven toppy market, traders sold off into the news, setting the Dow up for a revisit to the 10,000 points region like I have been talking about for the past few days. Yes, this is a healthy and necessary retreat in order to set the market up for higher highs.

For now, the Dow remains in a all out bull trend.

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Options Expiration Week Ahead

2009-11-15T17:27:00.000-08:00

The Dow ended the week up a total of 247 points or 2.46% last week as investors take the Dow out of the 10,000 points blackhole.

But is it really safe now? On a long term basis, yes. We have announced a primary bull trend months ago and if you have followed on that, you would have made significant gains by now. How about the short term? Well, last week's rally left the Dow once again in short term overbought condition and short term bearish momentum is once again rising. I would expect a revisit to the 10,000 points again this week so that the Dow can get out of overbought condition again and also establish the 10,000 points as a new short term support level. Once that is done, the bull trend can continue.

This is options expiration week and leading indicators week (see Stock Market Calendar), so do expect a fair bit of volatility.

For now, the Dow remains in a all out bull trend.

Retreat Begins...

2009-11-12T16:43:00.000-08:00

The Dow ended its 6 days rally with a 93 points retreat today, forming a short term evening star signal. Yes, it seems like the retreat that I have been expecting is coming just that few days earlier than expected. Like I mentioned yesterday, this retreat is inevitable and healthy for the market and whether the 10,000 points area becomes the next short term support level is critical for whether the market moves higher.

Today's ditch came on the back of a better than expected jobless claims number (see Stock Market Calendar), further reinforcing the fact that it is a technically driven market right now. Markets become extremely technical driven when its bottomy or toppy. This is definitely an intermediate term toppy market where a lot of uncertainty and profit taking takes place.

For now, the Dow remains in a all out bull trend.

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Running Out of Short-term Steam

2009-11-11T20:02:00.000-08:00

Another largely sideways day for the Dow, closing up by 44 points, making it the 6th consecutive positive day. Not unusual for the market to trade largely sideways for a few days following huge single day rallies or ditches. Even though volume was seriously lacking today, today's market action remained largely bullish as the Dow made new highs for the year. The Dow also entered short term overbought condition today and with investors obviously being cautious, I would expect the Dow to actually go sideways for a couple of days more before actually turning downwards and retest the 10,000 points level again. This retest is extremely important in order to establish it as the new short term support level. That will also help ease the Dow out of its short term overbought condition for new highs.

For now, the Dow remains in a all out bull trend.

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Dow Breaks Out For REAL!

2009-11-09T19:11:00.000-08:00

The Dow broke out of the 10,000 points resistance zone as expected with a huge 203 points rally, closing the day at 10226 points.

Yes, this is the resolute, clean, breakout that makes a breakout. Volume was also encouraging and rally was broadbased. Not only did the Dow breakout of the 10,000 points zone cleanly, it also defeated last month's high all in one day (the 2 criteria I mentioned yesterday). This is an extremely important breakout that will promise more upside to come. The market broke out as G20 nations committed to continued support for world economy until recovery is certain. Obviously many people still think the recovery isn't certain. Well, we always need late comers to the party in order to throw leftovers to. We are certainly not one of them.

The Dow is still way off short term overbought and MACD has just crossed into positive territory, this gives plenty of room to upside before the Dow retreats and retest the 10,000 points again as I have mentioned yesterday. I expect this to be a strong positive week with some consolidation next week. Enjoy the bulls!

For now, the Dow remains in a all out bull trend.

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Quiet Week Ahead...

2009-11-08T17:24:00.000-08:00

Unemployment rate reported in higher than expected last Friday at 10.2%, beating consensus of 9.9%. In fact, that was the highest unemployment rate since 1983. However, that didn't stop investors from keeping the Dow above water on Friday, closing the week up by 310 points ( 3.20%).

Last week's market action has once again been largely technically driven with investors pouring in at the 50MA line, driving the Dow onto the 10,000 points level again. Other than a lack of volume, last week's market action has been extremely encouraging with the Dow still way off short term overbought level, giving it plenty of room to move to upside. So, is the 10,000 points over? It will if the Dow beats last month's high and then retreat to rebound off the 10,000 points level again. That will set the 10,000 points level as a support level and leave the Dow with plenty of upside. This is a quiet week ahead with no major releases (see Stock Market Calendar). Last week's numbers paint a clear picture; the economy is recovering but it takes time for firms to start hiring again, which still leaves plenty of good news for the future to drive the Dow higher. I actually think it is a good thing.

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

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Profit Takers Still In-Charge

2009-11-04T20:02:00.000-08:00

The Dow started the month optimistically, closing up by 76 points on better than expected ISM index.

The strong follow up that we are hoping to see did not happen,instead, all we saw was that profit takers were still very much in control of the situation, beating down the market right after today's FOMC Announcement. Yes, profit takers were merciless in securing positions in cash even though the Fed did everything right, destroying what is to be a strong follow up day. Yes, if the market ended as strong as it was before the Fed announcement, investors might have enough confidence to start coming back in again. That didn't happen. This puts the Dow in an extremely perilous position jammed sideways between its 30 and 50MA. The good thing about today's market action is that it left the Dow with a reversal of its short term bearish momentum so its pretty much neutral now. There are obviously bulls in the market but they are just not as shrewd as the profit takers.

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

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Great Start To The Month

2009-11-02T16:54:00.000-08:00

The Dow started the month optimistically, closing up by 76 points on better than expected ISM index.

The US economy continues to present optimistic report cards as the ISM index turned in far better than expected. ISM index released this morning turned in 55.7 versus last month's 52.6 and beating consensus of 53. In fact, this reading is now way higher than any of the ISM index readings back in the bullish 2007! Hold on, what is this ISM index anyway?

The ISM Index is the Institute of Supply Management Manufacturing Index. It is also known as the ISM manufacturing index with its sister ISM services index sometime later this week. The index is compiled from a survey of 300 manufacturing firms and is the first economic indicator released every month. Its correlation with real GDP is what made it a heavyweight economic indicator watched even by the Fed. In fact, an ISM index reading of 50 has been consistent with a real GDP growth of about 2.5% with every full point adding another 0.3%. Generally, a reading above 50 indicates economic expansion while a reading below 50 indicates economic contraction. That made today's 55.7 an indication of economic expansion without a shadow of a doubt.

Traders and investors obviously welcomed the great news, pushing the market up in the morning before once again succumbing to profit taking pressure in the afternoon. Even though there was obviously still much profit taking in the market, the Dow did once again bounce off its 50MA, strengthening it as its intermediate term support level. But lets not rejoice too early. We do need to see a strong follow up tomorrow before we can lean the edge towards the bulls. For now, sentiments remains more bearish than bullish.

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

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New Month & A Heavyweight Week Ahead

2009-11-01T16:13:00.000-08:00

Welcome to a new month! Let's hope the new month brings a new breakout and new profits for all of us!

What was shaping up to be a rebound last Friday turned out as a dismal week with the Dow down 2.6% on the week, ending right on top of its 50MA line again.

Yes, the only explanation so far is the widespread consolidation sentiment near the 10,000 points level as the most important data last Friday, the Chicago PMI turned in way better than expected and above the 50 line at last, indicating economic expansion. Yes, traders have been taking profit whole week last week, bringing the Dow out of short term overbought and back down into short term oversold condition again. A look at the weekly charts doesn't make this retreat any more threatening than the many pullbacks that we have got along this rally so far. This means that the integrity of this rally is still intact for now. We need to see a rebound off the 50MA this week in order to preserve this rally. This is going to be a heavy weight week with the ISM index on Monday, FOMC Announcement on Wednesday and Jobs report on Friday (see Stock Market Calendar) and those numbers would certainly be the key to providing that much needed boost back to the 10,000 line.

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

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US Economy Steps Out of Recession

2009-10-29T18:58:00.000-07:00

The Dow gained almost 200 points today as the US economy steps officially steps out of recession.

The US economy steps out of recession at last with the Q3 GDP coming in positive 3.5%. This is the first time Real GDP has treaded positive territory since this recession started and a positive Real GDP number officially ends the recession on the data basis. Yes, unemployment rate has yet to turn around, that's why most people don't feel it yet but it takes time for businesses to pick up again and then when demand continues to grow will businesses start hiring again. And the numbers tell us that businesses ARE picking up now, so its just a matter of time.

The Dow's rebound today off its 50MA is extremely critical and coincidental to the GDP number. This rebound from a short term oversold condition occurred with good trading volume which makes this an extremely positive rebound. In fact, this could give the Dow the energy it needs to break the 10,000 points cleanly this time round.

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

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Dow Visits 50MA As Expected...

2009-10-28T18:11:00.000-07:00

Like a tame baby, the Dow tested its 50MA as I have expected it to, closing down by 119 points to end at 9762 points.

Yes, the market has rarely been this predictable. In fact, its really when greed and fear is at their highest when the market is most predictable. Resistance levels will play out and support levels will be visited. Overbought markets will consolidate and oversold markets will accumulate. Nothing is more predictable than that. Today's market action brought the Dow back into a short term oversold condition once again, supported by its 50MA and with its put call ratio above 1. All these tells me that this is once again a high probability accumulation point for the Dow. In fact, everytime the put call ratio goes above 1 over the past 6 months, buyers would step in shortly after. A put call ratio reading above 1 indicates that more put options are traded than call options. See daily put call ratio from our Option Trader HQ.

What does all this mean? Simply this is not the time to be newly short. The Dow is going to linger around the 50MA for a few days, no doubt, going slightly above or below the line, before making a decision whether to break upwards or downwards. For now, odds certainly favor a upside breakout.

All of today's economic data turned in worse than expected and some high profile analysts are already calling this the end of the 6 months rally and some are even calling a continuation of the long term bear trend, which of course no longer exist under the Dow theory. Well, the tendency to over-react is human nature afterall and prevalent during volatile market conditions. Real traders play it cool and trade by the trend, not the numbers.

For now, the Dow now turns short term bear trend within an intermediate and primary bull trend.

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Dow Corrects to 30MA as Expected...

2009-10-26T20:53:00.001-07:00

Without any surprise, the Dow yielded under more profit taking today closing down by 104 points at 9867 points.

Like a tame little baby, the Dow did exactly as I expected it to, correcting down to its daily 30MA line. The 30MA is an extremely important short term support for the Dow, breaking which, it will test its intermediate support which is its 50MA. With the 50MA so close behind and the market being far from short term oversold, testing it seems inevitable. As strong a psychological resistance level as the 10,000 points ought to be, we should see the Dow go into a deep short term oversold condition before it musters any strength to challenge the 10,000 points level again. But take heed, challenge and break it the Dow will, its just a matter of time.

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

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GDP Week

2009-10-25T19:14:00.000-07:00

Last week was a negative week as expected with the Dow turning down a marginal 23 points week on week.

The 10,000 points resistance zone still hasn't caused the kind of consolidation that I have initially expected. In fact, the Dow merely went largely sideways, skewered on the 10,000 points level like BBQ meat. Short term bearish momentum continue to rise but is still way from being short term oversold. The daily 30MA and 50MA are also following tightly behind, creating a very interesting situation. Even though I expect the 10,000 points level to be a level of psychological resistance, as it has already proven to be, I don't really expect the Dow to break below its 50MA on such a consolidation. However, its 50MA is now so close behind that even a correction down to that level won't justify the resistance offered by strong psychological resistance levels. Could the Dow do something like it did back in June? For now, what's clear is that short term risk remains high due to uncertainty with a far higher level of certainty for the long term.

Advance estimates of Q3 GDP on Thursday (see Stock Market Calendar) is going to be the hot number this week. So far, GDP has been in the negative territory and investors are certainly waiting for a positive number for Q3. In fact, consensus is calling for a positive 3% versus last quarter's -0.7%. Yes, investors really would love to see the economic recovery truly reflected as a positive GDP number and if it does, it could provide the stimulus for the Dow to go from the recession market of below 10,000 points to the growth market of above 10,000 points.

For now, the Dow has lasped into a short term neutral trend within an intermediate and primary bull trend.

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Another Futile Attempt

2009-10-22T18:06:00.000-07:00

The Dow gained 131 points today as traders made another futile attempt at breaking the 10,000 points level cleanly.

As expected, the Dow continues to struggle at the 10,000 points level stacking candles up on the 10,000 points line like skewed meat. When will the Dow muster the energy necessary to break from this skewer? Well, not without revisiting its 30MA. Rebounding off its 30MA has proven critical to helping the Dow break short term resistance levels and to make new highs. In the face of such a strong resistance level, I don't think its going to be an exception. With the 30MA catching up so quickly, I won't even be surprised at a revisit to the 50MA like it did early this month. Short term bearish momentum continue to rise into today's "rally" and volume isn't impressive either. With so many things against the Dow right now, I won't give much credibility to today's rally and will continue to look for more concrete evidence of strength.

For now, the Dow remains in all out bull trend.

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Dow Retreats As Expected...

2009-10-20T20:08:00.000-07:00

The Dow retreated slightly by 50 points today as the 10,000 points blackhole continue to exert its gravity on the market.

Yes, expect the market to continue to be technical driven as traders and investors struggle to decide if other traders think its time for the market to move from recession mode into growth mode. Nobody wants to be the fool holding on to a short term pullback especially when its so obvious. This is why short term bearish momentum continue to rise today as the Dow retreats from short term overbought condition. In fact, I won't be surprised to see the Dow actually break lower than 10,000 points this week to muster some strength at its 30MA level. However, make no mistake about it, the Dow is going to eventually break the 10,000 points barrier cleanly and if you have holding power and is not concerned about short term volatility, then all you have to do is to wait for it to happen patiently.

For now, the Dow remains in all out bull trend.

See how I made 52% profit with call options on CREE yesterday in this toppy market!

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Did the Dow Breakout?

2009-10-19T18:17:00.000-07:00

The Dow challenged the 10,000 points again today, "breaking" it by 92 points to close at 10,092 points today.

The great 10,000 points challenged continued today as earnings reports continue to roar in optimistically. The Dow once again stood above the 10,000 points level but is that a breakout?

Well, sadly, I won't call that a breakout yet. First of all, volume was extremely light. Volume is an extremely important indicator of breakouts, indicating mass public interest in a single direction but that wasn't what we got today. The majority clearly has not casted their votes yet. Secondly, the Dow is clearly in an area of congestion now, bobbing on the 10,000 points level, seeking for some majority help. In fact, we also didn't see many stocks with bullish entry signals in the market today, signifying that there may not be enough new bullish momentum to follow up over the next few days. I won't be surprised to see the Dow retreat a little back down to its 30MA before trying again for real.

For now, the Dow remains in all out bull trend.

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The Fight For 10,000 Points Continues...

2009-10-15T17:53:00.000-07:00

The Dow closed slightly higher than 10,000 points again at 10,062 points, gaining 47 points today.

Yes, the fight for 10,000 points is on right now and don't let it fool you that the 10,000 points resistance zone has been broken just because the Dow closed 62 points higher than 10,000. There are two fundamental principles in technical analysis; Prudence and Significance. The 62 points break was not significant enough to call a breakout and it won't be prudent to assume as such. This is also why I keep using the term "resistance ZONE" and not the common "resistance level". There really isn't a clear resistance level on an exact price in technical analysis as traders trade around a certain price, not AT the certain price. This means that a strong resistance level would exert its influence on prices around that level creating a resistance zone within which more eager traders would take profit before that price is reached and greedier traders would venture to take profit when the level is slightly breached. Yes, we are in that resistance zone right now and even though the market was up again today, internals remain weak as decliners continue to par advancers. With the Dow once again in short term overbought condition, I won't be surprised to see the Dow pull back a little on Friday before trying again next week.

For now, the Dow remains in all out bull trend once again.

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10,000 points LOOOOOMING!

2009-10-13T18:07:00.000-07:00

The US market ended mixed with the Dow down 14 points even though earnings and economic numbers continue to be encouraging.

The dollar is down, store sales are up, earnings remain great, so why is the market this weak? Indeed, market internals are extremely weak as well with decliners and advancers almost 1 : 1. There is only one explanation... the 10,000 points! Yes, the 10,000 points level can be deemed the dividing line between a recession market and a strong market. Investors are still not too sure about casting that vote from recession market to a strong bull market yet. This is also why the 10,000 points zone is going to be such a strong resistance level. In fact, don't be surprised to see profit taking way before 10,000 points is reached especially with the Dow now in short term overbought once again.

For now, the Dow remains in all out bull trend once again.

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Afternoon Sell Off... 10,000 Points Closing In...

2009-10-12T18:23:00.000-07:00

The Dow finished the day today up a marginal 20 points from an intraday high of 9865 points as traders sell off in the afternoon.

Fundamentals
What was shaping up to be a huge up day ended up with the Dow up only 20 points as traders sell off into the light trading volume in the afternoon. Yes, it is a partial holiday in the US market today, leading to a very light volume day. Who trades on a day like this? Definitely hard core traders who are out for some money which totally explains the afternoon profit taking. The biggest numbers for the week are due only on Thursday and some traders just won't wait that long. The Empire State and Philley Fed on Thursday will be the movers for the week (see Stock Market Calendar) as traders and investors keenly await more confirmation on the state of the economy. Again, I have no doubts that the world economy is now in the recovery phase and some volatility in the economic numbers isn't going to scare me out of my long term positions.

Technicals
Even though the Dow was up only 20 points today, it still managed to make a new high for the year, which is extremely important in the continuation of the bull trend. Breaking the September highs shows that the bull trend is still intact and that last month's high isn't going to be a resistance level leading to a double top formation. But we are not yet out of the danger zone. With the Dow this close to last month's high, there are still chances that it might just collaspe and form that double top all traders fear. The Dow went as high as 9931 points before being beaten down today. This tells me that traders are indeed ready and willing to take profit near the 10,000 points level and that it will be a strong resistance level. The Dow is once again in short term overbought condition, casting shadows on the possibility of staging a decisive breakout. The 10,000 points zone could prove to be a challenge.

For now, the Dow remains in all out bull trend once again.

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