Daily US Stock Market Fundamental & Technical Analysis

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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Welcome to a new week!

2009-10-11T18:19:00.001-07:00

Welcome to a new week, and yes, US stock market is OPEN on Columbus Day Monday.

The Dow had a great rebound week last week, gaining a total of 377 points or 3.98%. The main driver last week was of course the better earnings and jobless claims. However, volume was seriously lacking as investors continue to be cautious. That did not stop the fact that short term bullish momentum is still rising and that the Dow is still a long way to go from being short term overbought, setting up the stage to challenge the 10,000 points. I expect the 10,000 points to be an extremely strong resistance zone and that we will not see a one touch breakout. Investors should be ready to ride a volatile 10,000 thunderstorm and traders might want to take short term profits.

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

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Jobless Claims Beats!

2009-10-08T18:27:00.000-07:00

The Dow surged 61 points today as Jobless Claims turned in far better than expected.

Fundamentals
After being wallopped by a barrage of worse than expected economic numbers this week, investors were relieved to find the Jobless Claim turning in far better than expected. Indeed, as I mentioned yesterday, investors definitely need a foothold after this month's dismal employment numbers and that this may be the catalyst needed to power the Dow all the way to 10,000 points. Jobless Claims this week turned in at 521K, beating consensus of 540K by a mile. In fact, today's number took jobless claim's 4week average line, which is the indicator most analysts watch, down to the lowest level of the year. Even though it is still way higher than the pre-recession levels of about 350K, its still a significant improvement that points to a brighter tomorrow. Earnings of companies continue to beat estimates today, casting an optimistic sentiment on the rest of the earnings season.

Technicals
The Dow's 61 point rally was an important one on strong volume. Today's rally followed up on the rally 2 days ago, which is essential to the integrity of this intermediate bull trend. Should today turn out to be a dismal down day, the intermediate bull trend could be at stake. For now, bullish momentum continues to rise with plenty of room left to short term overbought. As long as the Dow breaks last month's high, there will be no more resistance on the way to the 10,000 points level.

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

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Earnings Season Starts...

2009-10-07T17:59:00.001-07:00

The Dow started the earnings season with a small profit taking day, correcting marginally by 5 points.

As expected, most of the earnings announced this first day of the earnings season were positive. However, that didn't stop investors from taking some profits off the table of these great stocks such as YUM as much of this expectation has already been priced into the 2 days rally the past two days. Even though there were traders selling into the better earnings, volume is extremely light, suggesting that such profit taking activity isn't widespread. Another piece of concern is tomorrow's jobless claims. After a dismal jobs report this month, investors certainly need a foothold to regain some footing. Consensus is for a much lower number of 540K. If it matches or beats, we can be sure of a smooth journey to the 10,000 points level.

A small low volume doji candle was formed today on the Dow suggesting inactivity due to digestion in the market. Digestion or "wait and see" usually occurs after strong rallies and the Dow already had a good 2 days rally. Short term bullish momentum continues to rise but is still far from being short term overbought. This gives the Dow plenty of room to upside, paving the way to the 10,000 points level as long as the 30MA holds.

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

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I am BACK!

2009-10-06T18:18:00.000-07:00

I am back at last to where blogspot is accessible. Yes, I spent one week in a country where blogspot was banned. Glad to be back.

The Dow gained an encouraging 131 points as store sales and redbook turns out positive, setting the stage for an optimistic earnings season.

Both Store Sales and redbook, measuring consumer spending, turned up better than last week which suggests a recovery in the consumer market. This is definitely a great way to set the stage for the earnings season as more and more traders jump in ahead of the earnings season. How the earnings season turns out is anyone's guess but the technicals certainly suggest that investors are greeting it with a lot of optimism.

The Dow broke out and stood atop its 30MA once again, which is the Dow's short term support level. Bullish momentum is also beginning to build up and with the Dow way off overbought condition in a strong intermediate bull trend, it does look set to challenge the 10,000 points level this time round.

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

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Danger: 10,000 points Resistance Zone!

2009-09-23T17:52:00.000-07:00

The Dow closed down by 81 points today, retreating over 160 points from today's high as the 10,000 points resistance zone starts exerting its influence.

Yes, today's move is totally technical as there is nothing in the Fed's message to blame the Fed for today's ditch. In fact, the Dow rallied briefly and came within 100 points from the 10,000 points level before a sudden wave of profit taking took over. It does seem like investors are indeed fearful of getting caught in the expected 10,000 points consolidation and has decided to take profit slightly earlier. Indeed, the 10,000 points level can be deemed the dividing point between a weak Dow and a strong Dow. As I have said 2 days ago, with the Dow building up short term bearish momentum and at short term overbought condition, it is not strange to see it test the 9600 level before moving on any further. One thing we learnt today is how powerful the 10,000 points resistance zone is going to be. As such, it would not be surprising even for the Dow to take an intermediate correction at about the 10,000 points level. This is definitely not the time to be newly bullish for the short term.

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

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Dow Sideways as Leading Indicators Disappoint...

2009-09-21T18:24:00.000-07:00

The Dow opened deep in the red and closed down by 41 points as Leading Indicators failed to beat consensus.

Fundamentals
Leading indicators is a widely watched economic indicator consisting of ten economic indicators that typically lead economic activities. It provides an indication on the expected economic activity about six months down the road, hence its importance. Indeed, the stock market always looks forward, discounting to present value all future expectations. The mistake too many investors make is to take the stock market as a reflection of current economic activities and then scratch their head why the stock market head in so different a direction to present conditions most of the time. Even though Leading indicators are lower than expected, such volatility is to be expected as it has gained steadily over the past few months, supporting the recovery scenario. Indeed, nothing takes a straight path up or down, even the leading indicators. In fact, the sharp recovery off the intraday low today shows that sensible buyers are still in the market. Investors are also expected to be cautious prior to this Wednesday's FOMC Announcement (see Stock Market Calendar) as they traditionally do. Not surprising to see another sideways day tomorrow.

Technicals
The Dow did yet another sideways day today as it continue to digest away its short term overbought sentiment. As I have always said, a few sideways days following each big up day is to be expected. This is the third sideways day since the Dow staged a breakout on 16 Sep, so it is nothing unusual yet. In fact, with the Dow still slightly in the short term overbought condition, it could very well retest the 9600 level before moving any higher. Yes, there is no doubt the way ahead is upwards.

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

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Housing Week Ahead...

2009-09-20T17:18:00.000-07:00

Last week was a breakout week for the Dow as it did a decisive break from the 9500 resistance zone, gaining a total of 215 points and closing the week at 9820 points. That breakout also helped me take a 53% profit on my CNX position.

This week is housing week with a ton of housing numbers being released all week long (see Stock Market Calendar). Past numbers has pointed towards a recovering housing market after all the toxicity has been sunk through the economic crisis. No doubt the numbers are going to continue pointing towards a recovery in the housing market as it is clearly in the recovery phase now. It is because of its predictability that I doubt it is going to stop the Dow from testing the 9600 level. Such a testing is extremely important in establishing that area as a support region from the resistance region it used to be. Especially in this weak bull market, frequent testing of immediate short term resistance levels is to be expected.

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

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Up Up and AWAY!

2009-09-16T18:17:00.000-07:00

The Dow clears itself off the influence of the 9500 resistance zone today like a rocket ship out of Earth's gravity field, closing up 108.30 points.

Fundamentals
Investors were greeted with more indications of economic recovery today as both industrial production and housing index beat expectations (see Stock Market Calendar). In fact, this is the first time industrial production is up 2 months in a row since Oct 2007 when the economic crisis begun, indicating that the recession for manufacturing is over. Housing index also continued to rise and beat expectations suggesting the recovery in the housing market is also underway. Both numbers pleased investors greatly as they continue to push the Dow towards the 10,000 points mark. Tomorrow's focus would be the Philly Fed, housing starts and jobless claims.

Technicals
The breakout today is like pulling right out of a gravity field. Today's breakout completely took the Dow out of the influence of the 9500 resistance zone, paving the way for the 10,000 points mark. Short term bullish momentum continue to rise even though the Dow is slightly short term overbought. As far as technicals goes, nothing tells me that the Dow is going to retreat anytime soon. Let the bulls RUN!

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

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2009-09-15T18:26:00.000-07:00

The Dow broke out of the 9500 resistance zone today, closing up 56 points to end at 9720 points, making a new high for the year.

Fundamentals
Early profit takers were quickly beaten back as investors digest the optimistic Empire State Index which continued to point towards US economic recovery (See Stock Market Calendar). The Empire State Index, also known as the Empire State Manufacturing Survey, is a monthly survey of manufacturers in the New York area and measures their current and forward looking sentiments. This is an important forward looking indicator which the Fed watches very closely. In fact, the Empire State Index has been in positive territory for 2 consecutive months so far and rising steadily. There is no doubt from these numbers that the economic recovery is underway. What really bugs traders is how much of these are already priced into the stock market?

Technicals
The Dow's breakout today is an important one and on good rising volume. It also helped my Star Trading System make a new 53% profit on CNX today. It wasn't the strong kind of breakout that we are used to but a continuation of its gradual rise much like the morning sun. In fact, the Dow is once again at a new high for the year, putting it less than 400 points from the 10,000 points mark, which is expected to be a strong resistance level. So far, the bull trend has been slow, gradual and a little weak but rising steadily along a rising 30 days moving average nonetheless. Today's move also took the Dow into short term overbought condition, so don't be surprised to see a retest of the 9500 level soon. Yes, a retest is necessary to establish it as the new support level, giving investors the confidence to push the Dow even higher.

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

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Quadruple Witching Week

2009-09-13T17:43:00.000-07:00

Welcome back from the weekend!

The Dow never did the decisive breakout I thought it will last Friday and is currently still in the danger zone. Yes, the 9500 resistance zone still has significant influence at 9600 points and the Dow can still be beaten down however slim the chances may be. Yes, odds still favor a bullish breakout as the Dow has yet to enter a deep oversold condition and its rising lows still suggest a strong short term bullish sentiment.

It is quadruple witching Friday this coming Friday when the market typically experience the heaviest amount of trading for the quarter. Quadruple witching is not necessarily more volatile but certainly is a heavily traded day.

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

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One More Step to Breakout

2009-09-10T18:55:00.000-07:00

The Dow made its fifth straight up day today, closing up another encouraging 80 points as jobless claims fell more than expected.

Fundamentals
Jobless claims beat expectation of 565K, turning in only 550K today, reassuring investors that the job market isn't going to turn sour all of a sudden again. Indeed, investors have been jittery over the fact that jobless claims has not made a new low for months. Indeed, there is still a long way from the pre-market-crisis level of below 350K. However, there is no doubt that the economy recovery is now underway and that it take time to translate into jobs in the real economy. By then, the stock market would have priced it all in. Indeed, let's never forget that the stock market is a discounting mechanism that discounts to present value the expected future earnings and performance of all the companies in the market. It certainly isn't a day to day reflection of the real economy.

Technicals
On the technical front, the Dow continued its gains with rising bullish momentum and rising volume, which is extremely encouraging. It is now just one step away from making a clean breakout from the 9500 resistance zone and if it does, it will get into the short term overbought region and probably retest the 9500 level, establishing it as a new support level before moving on to the much anticipated 10,000 level. For now, the Dow does look good for a clean breakout tomorrow even though Friday trading tends to be a little sluggish.

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

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Dow Near Breakout

2009-09-09T20:28:00.000-07:00

The Dow continued into its 4th straight up day today, gaining almost 50 points as investors continue to vote optimistically for the future of the US economy.

FUNAMENTALS
Nothing is more revealing to investor sentiments than where the market goes on the second week of each month. The first week of each month is when all the most important economic numbers are released and the second week is usually a quiet week without any big numbers on the line, allowing investors to really sit back and decide which way to vote. What I call the "Voting Week". Yes, investors have certainly been voting for the Bull camp whole week. Even though gains were not spectacular, they are nice, gradual and steady, the way we all like it to be. The continued weakening of the Dollar and the rise of Gold this year so far seems to set the stage for the next round of inflation worries in the near future. Indeed, this is an extremely tricky thing to balance out. We won't want inflation to hit before the job market recovers and we won't want the recovery in the market to end prematurely as well.

TECHNICALS
The Dow is now into that same 9500 resistance zone that it was in late August but this time round, it is a long way from being short term overbought and short term bullish momentum is also rising. When the Dow last visited this level, it was exhausted like an old man pulling a bullock cart. It was short term overbought with short term bearish momentum rising, hence the lack of strength in breaking that level. This time round, the bearish divergence formed last week doesn't seem to be exerting any bearish influence at all and odds now favor the Dow making a decisive topside breakout within these few trading days. If the Dow overcomes the 9500 resistance zone, its next challenge would be the 10,000 points psychological level where we should see heavy profit taking prior to that. So far, the short term bullish trades that our Star Trading System have produced has done quite well and would certainly reach our profit taking points should the Dow breaks out.

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

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