Daily US Stock Market Fundamental & Technical Analysis

Fundamentals
The US market opened strongly and remained strong for most of the session on the promise of extended tax cuts before succumbing to a wave of profit taking in the final two hours. Yes, there were no economic releases or significant news to account for the sudden wave of profit taking that took place in the final hours. Interestingly, investors sold out of bonds strongly as well, lifting bond yields strongly across the board and that could lead to a return to bonds over the next couple of days on the attractive yield, reducing support for the equities market.

Technicals
Even though today's market action seemed a little pessimistic, it is actually very common to see late profit taking forming inverted hammer candlesticks early in a new leg up as some investors sell out on breakeven after a painful retreat. In fact, we saw numerous such inverted hammer candlesticks on the Sep to Nov leg up as well, so its really nothing to fuss about. The Dow has just entered a short term overbought condition and might have to move sideways for a few days more in order to muster some more energy before resuming the leg up to new highs.

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

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

New Leg Up?

Investors took back lost grounds last week, closing the Dow up 2.62% week on week in a week of mixed economic data and easing tensions on the Korean Crisis.

All of last week's economic data turned out extremely positive except for the marginally higher unemployment rate on Friday. Unemployment rate turned out 0.1% (9.8%) higher than consensus of 9.7% much to the surprise of every analyst as employment data by ADP and the dropping trend in jobless claims over the past 4 weeks seems to point towards a better unemployment rate than this. In fact, many analyst think the data could be revised upwards. As such, investors remained optimistic through the disappointing data on Friday, closing Friday marginally higher by 0.17%. This is going to be a quiet week, like all second week of the months, with no important economic releases. This is also what we call a "Digestion Week" for investors to make sense of all the heavyweight economic data of the first week and to decide what to do.

On the technical front, the Dow made an important rebound off the weekly 200MA with room left to upside, tilting the odds to upside for the next leg. Indeed, as I mentioned last week, a decision made last week would certainly result in a significant trend and that is clearly what is happening now. Immediate resistance level would be the November high with immediate support on the daily 30MA.

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

Dow Follows Up Strongly...

The Dow followed up on the rebound of Wednesday bolstered by better than expected Pending Home Sales data, closing up 106 points on strong volume.

Fundamentals
Investors followed up weakly on Wednesday's rebound when market opened but things started really taking off when the Pending Home Sales data turned up 10.4% stronger, indicating a strong return into the housing market, which is an important engine to economic growth. The lackluster opening today could be due to jobless claims turning in higher than expected. However, the 4 weeks average for jobless claims, which is what analysts really look at, continues to point towards a declining trend in jobless claims, which is definitely a plus point. Investors are also clearly pricing in an optimistic jobs report for tomorrow and I won't be surprised to see some profit taking even if the report was as optimistic as expected.

Technicals
The Dow gained a total of 356 points in this two days rally and as I mentioned in my newsletter to paid subscribers yesterday, this is truly the time to start taking cautious new long entries in order to ride the next leg up. However, since the Dow has made such a huge move in just two days, I won't be surprised to see a sideways day tomorrow no matter how the jobs report turns out. However, with the Dow so far from being short term overbought, I remain optimistic that we should see a positive week next week as investors digest all the economic data recieved these couple of weeks.

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

Korean Concerns Continue...

The Dow continued to trade sideways along the 11,000 points support level as investors continue to await a resolution to the Korean issue.

Fundamentals
The US market continue to trade with a pessimistic note today even though all major economic data today turned in better than expected. Obviously investors are cautious of the possible effects of a melt-down in the Korean crisis which could turn world markets negative overnight. However, we can be sure that if the Korean leaders come to a peaceful resolution or that the crisis doesn't seem to have any legs, all these better than expected economic data will catch on very quickly and spur another strong leg up. For now, the world hangs on the balance.

Technicals
The Dow broke below the daily 50MA support level today, holding just above the 11,000 points psychological support level. The only positive thing about today's trading pattern is the fact that it traded well within yesterday's trading range. However, from this point forward, any kind of breakout, whether to upside or downside, can be expected to have significant leg. Immediate support level is now the daily 200MA at about 10630 points.

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

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Welcome Back From Long Weekend!

Welcome back from Thanksgiving Weekend! Hope everyone had a fulfilling rest and are ready for action until Christmas comes.

It was certainly a cautious and sideways Thanksgiving week in the market last week even though GDP was better than expected and jobless claims broke decisively below the 450K level at last. Indeed, investors these days are extremely cautious of long weekends as nobody knows what will happen over a few day's period in this uncertain times.

However, it must be acknowledged that economic data continues to turn in encouragingly and the Dow continued to hold above its daily 50MA support level which is critical to the healthy progression of this intermediate bull trend.

This week, the first week of December 2010, is again a week of important economic numbers; ISM Index and Jobs Report (see Stock Market Calendar). With the present trend of improving economic data, odds once again favor to upside especially with traders willing to hold the market at support. Lets look forward to an exciting trading week ahead.

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

Lower Despite Better GDP

The Dow took a hit today ahead of the Thanksgiving weekend, closing down a huge 142 points.

Fundamentals
Even though GDP revision for Q3 turned in better than expected, investors sold off early on the expectedly lower retails sales and the uncertain Thanksgiving weekend ahead. Market opened down and stay down throughout the session with no clear strength or leadership. Existing home sales also turned in worse than expected with a month on month drop of 2.2%. However, that didn't seem to be the catalyst for today's beat down as futures were already pointing down hard before market open. Much of today's negativity seemed to have been passed over from Asia side as China market ended starkly lower due to the latest North Korean aggression against South Korea, affecting every other market that opened after that. Yes, thats how black monday started too. Tomorrow, we have the heavy weight numbers for the week, Durable Goods Orders, Consumer Sentiment and Jobless claims (see Stock Market Calendar). However, from today's market action, we could see that investors are clearly cautious ahead of the Thanksgiving holiday and may not be too ready to react to positive surprises. On the other hand, with such a huge drawdown today, there would certainly be bargain hunters early tomorrow's session, providing some support.

Technicals
The Dow took an unexpected hit today, correcting all the way back down to the critical daily 50MA support level. However, such sudden "Take Down" back to a critical support line from which the market just rebounded from is a very common phenomena and is usually a bear trap which will see a rebound to new highs right the very next trading day onwards. This, of course, is what we are hoping for ahead of the holiday. However, trading is not based on hopes alone. Today's sell-off had a healthy volume behind it which gives it some credibility. This makes tomorrow extremely critical. The Dow need to stage a significant rebound tomorrow off the 50MA line in order to re-enter the safe zone. Otherwise, we could see that intermediate correction that I was talking about before.

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

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Thanksgiving Week!

Welcome to ThanksGiving Week! Yes, this is going to be a holiday shortened week due to Thanksgiving on Thursday and a half day trading on Friday which we won't be expecting much action.

The Dow did a critical rebound off its daily 50MA line which is critical for the sustenance of the current intermediate bull trend. Indeed, last Thursday's rebound was very crucial to saving the market from dropping into an intermediate correction. Even though this is a holiday shortened week, there are still a few important economic releases this week which could either help the market go into a new bull leg or break it totally. GDP on Tuesday along with Durable Goods order and Jobless claims on Wednesday both can significantly affect the current shaky trend ().

On a weekly basis, the Dow is currently holding above its weekly 200MA, which is an important line to keep above in a bull trend. We would definitely love to see a strong followup on Monday and the index futures seems to be indicating strength on Monday right now. Typically, markets tend to do well in Thanksgiving week and Christmas week as long as its not in a strong bear trend. So we are also looking forward to a more positive week this week.