US Market Today Daily Columns by Mr. OppiE
US Market Today - Mr. OppiE (Author Profile)
Sep 30, 2009
The Dow dropped marginally by almost 30 points today, recovering from a deep early morning loss of over 130 points due to disappointing Chicago PMI release.
Market opened in the green today with the 2nd quarter GDP being revised higher but was beaten down to a deep loss of over 130 upon the release of a Chicago PMI number that failed to live up to expectation. Consensus was for a better number of 52, suggesting economic expansion but it turned out to be a dismal 46.1 instead, suggesting continued contraction. In fact, it was even lower than the prior level of 50. What is the Chicago PMI and why does it matter so much to investors? The Chicago PMI stands for Chicago Purchasing Manager's Index. It is a survey conducted monthly by the Institute of Supply Management that brings us the heavyweight ISM Index. It is an indicator of sentiments in the Chicago area and a reading of above 50 suggests economic expansion going forward while a reading below 50 suggests contraction. After spending 10 months below 50, the Chicago PMI returned to the 50 level last month. This was why investors reacted so strongly to a retreat as investors are truly looking forward for the first reading above 50 since this economic crisis begun, which they obviously didn't get. However, one dismal number does not change the fact that the economy is recovering and the recession is over. This is why we continue to see buying into weakness, returning the Dow to almost breakeven for the day.
The bullish undercurrent that I mentioned yesterday came into work today, saving the Dow from a deep red day. Even though the day made a lower low and a lower high, there is a big bullish divergence formed against short term momentum indicators which continue to suggest strength in the market and a high probability positive close for the week. In fact, the Dow continues to hold its ground above the 9600 level which is extremely positive. Yes, the biggest number for the week comes only this Friday and until then, it's everyone's guess.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 29, 2009
The Dow dropped 47 points today hit by a poorer than expected consumer confidence.
Early trading started off in the green but dropped straight into the red in a cliff jump following a dismal consumer confidence release at 10am (see Stock Market Calendar). Consensus was expecting consumer confidence level to rise from the prior number of 54.1 to 57, however, reality failed miserably as consumer confidence level turned in at only 53.1 this time round, much lower than the last number. Even though investors were obviously disappointed with the number, common sense tells us that nothing takes a straight path up and volatility in every economic number is to be expected. In fact, the consumer confidence number is still making a healthy bull trend and discerning investors should be able to tell. In fact, technicals reveal a strong bullish undercurrent.
Indeed, even though the Dow was down today, there is a strong bullish undercurrent building up that might propell the Dow to the 10,000 level soon. First of all, the CBOE Total Equities Put Call Ratio collasped from 1.0 yesterday to 0.86 today in a significant 0.14 drop signifying a rush into call options. This usually means that options traders are speculating to upside. On top of that, short term momentum indicators has also begun turning bullish with very little volume going into the negative day today. All these tells me that even though the market is down, there is a strong bullish undercurrent now building up and that the week is most likely going to end positive as I have pointed out over the past few days.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 28, 2009
The Dow rebounded as expected today, gaining 124 points in a broad market rally.
There were no economic reports today, neither did oil nor gold nor the dollar make any unusual moves, as such, today's rally can only be technical. Indeed, as I have explained yesterday, the Dow made a higher high and higher low on its weekly candle last week, which is a bullish continuation pattern. In fact, the Dow rebounded nicely off the 9600 level as we said it will last week. However, volume is missing from today's rally. Yes, a lack of volume going into such an important rebound requires a follow up on higher volume the next day for confirmation. It tells us that investors are buying into this rebound scenario, which is extremely important going against the 10,000 points level. There is no doubt this week is going to be a positive week and we are getting closer to the unemployment rate reversal every month that passes by. A reversal in unemployment rate always confirms the end of a recession and the beginning of a new leg up in the business cycle.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 27, 2009
The Dow made a small negative weekly candle last week, closing down 1.58% on a weekly basis. Looking at the weekly chart of the Dow, what happened last week look like nothing but a typical pullback candle within a strong bull trend. Indeed, all bull trends contains such pullback candles that makes higher high and higher low. Yes, last week's negative candle continue to make a higher high and a higher low, suggesting a continuation of the bull trend this week. Coincidentally, this week is Job Report week once agian (see Stock Market Calendar) and beating consensus this week may be the catalyst needed to bounce the Dow off its daily 30 days moving average and rocket for the 10,000 points level. Consensus for unemployment rate is a higher 9.8% versus 9.7% last month.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 24, 2009
The Dow continued to head for a re-test of the 9600 level today, correcting down 41 points.
The Dow continued its pullback today despite jobless claims beating consensus by a wide margin. Jobless claims was expected to rise marginally this week from 545k last week to 550k this week, however, the number continued to fall to 530k this week instead. So why is the Dow still down? Even though most news wire attributed today's pullback to a worse than expected existing home sales, volatility in the existing home sales number is something to be expected and should not have affected the market so broadly as it did today. Yes, today's market action is totally technical as short term bearish momentum continue to build up and a re-test of the 9600 level in order to establish it as the new support level becomes necessary. The 9600 level also roughly coincide with the 30days moving average, which has been a strong support level for this bull trend so far. As such, chances are good that the Dow will continue towards greater heights following a rebound from that level. Do not be surprised to see the Dow continue towards the 9600 level tomorrow no matter how the Durable Goods Order turns out (see Stock Market Calendar)
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 23, 2009
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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US Market Today - Mr. OppiE (Author Profile)
Sep 21, 2009
The Dow opened deep in the red and closed down by 41 points as Leading Indicators failed to beat consensus.
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 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.
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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US Market Today - Mr. OppiE (Author Profile)
Sep 20, 2009
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.
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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US Market Today - Mr. OppiE (Author Profile)
Sep 16, 2009
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.
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.
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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US Market Today - Mr. OppiE (Author Profile)
Sep 15, 2009
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.
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?
The Dow's breakout today is an important one and on good rising volume. 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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US Market Today - Mr. OppiE (Author Profile)
Sep 14, 2009
The bulls won a hard fought battle today, closing the Dow up 21 points after almost a full day of trading in the red.
The fact that this is a quadruple week made sure that there will be more buying and selling than usual as derivatives such as stock options are exercised, closed or rolled forward. There wasn't anything significant in the news today as the market action remained largely sideways and technical driven. Advancers beat decliners by 2 : 1 on average trading volume. Overall, this is a non-descript day.
What was disappointing today is the fact that the Dow continued sideways in the "danger zone" without any breakout. The 9500 resistance zone continues to exert its great influence on the Dow as traders continued to take profit within this zone as we have witnessed today. However, short term bullish momentum continues to be prevalent and the Dow continues to look hopeful for a topside breakout.
For now, the Dow remains in all out bull trend.
US Market Today - Mr. OppiE (Author Profile)
Sep 13, 2009
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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US Market Today - Mr. OppiE (Author Profile)
Sep 10, 2009
The Dow made its fifth straight up day today, closing up another encouraging 80 points as jobless claims fell more than expected.
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.
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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US Market Today - Mr. OppiE (Author Profile)
Sep 9, 2009
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.
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 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.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 8, 2009
The Dow followed up on last Friday's rally, gaining 56 points, as investors rushed after watching world stock markets rally on holiday Monday.
Indeed, the Dow shot right past 9500 points when the market opened today as investors who missed the rally all over the world due to yesterday's holiday, rushed in. However, since this is still a very weak market, there will always be plenty of investors waiting to take profit on any huge surges and almost immediately, the bulls were beaten back mercilessly by a horde of profit takers. By the end of the day, bulls retook lost ground and brought the Dow higher on higher trading volume back near the 9500 points mark. It seems like investors all over the world are jumping to the beat of worldwide economic recovery right now, but is it time to start tightening ahead of the merciless inflation that we can all expect in the near future? In fact, China has gone ahead of the world in terms of tightening credit policies by tightening lending standards and lending limits. Yes, what China did was what we were taught in our economics textbooks, by why aren't the writers of our textbooks doing what they preached?
Very good and praise-worthy follow up in the market today. In fact, the gains can be felt even more strongly if you bought stocks (or options on stocks) that are relatively cheap, below the $50 mark. Today's action brought the Dow up against its 9500 points resistance band again; the level it failed to break late last month. This time round, short term bullish momentum is building up and the Dow is far from being overbought, which gives it a much higher chance of a breakout than last month. The Dow was already short term overbought with bullish momentum fading when it last challenged the 9500 level late last month. The Dow does look good to break the 9500 level this time round, following which, we should see the Dow turn back down to test that same level almost immediately in order to establish it as a support level. The only devil here is the big bearish divergence I pointed out yesterday. If the Dow breaks the 9500 level decisively, that divergence will be negated and the Dow would be out of its influence.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 7, 2009
Welcome back from the Long Weekend!
The Dow did a fantastic rebound off its 30 days moving average last Friday in a continuation of the bull trend. Indeed, markets around the globe was extremely bullish today as G20 ministers continue to stick to an expansion policy.
Bond yields also shot up across the board as investors rushed back into equities, giving support to last Friday's move. Yes, unemployment rate continues to rise but investors now knew better than to take that as the first indication of recovery. Indeed, unemployment rate could be one of the last things to come back up in this recovery. Its going to be a quiet week ahead without any heavyweight economic numbers so investors could focus on what all that has happened last week really means. No doubt the world is on the war path to recovery and the fundamentals look far better than they had been the past few years. Yes, what was missing in the past few years prior to the economic crisis was the housing market. Housing market has been in the slump for years and there can be no healthy economy without a healthy housing market. That is what is so different about this recovery. The market would have a much sounder fundamental with the housing market recovering along with the economy.
On the technical front, this rebound from the 30 days moving average is extremely significant as that is the short term support level for the Dow's intermediate trend. However, there are a few critical elements missing from last Friday's rally. First of all, volume was seriously lacking. As expected, pre-long-weekend trading tends to be thin and a rally on such thin volume suggests a rally with very soft bones. On top of that, the Dow is short term negatively divergent with RSI. This shows that the short term inclination is still bearish and this single day "rally" needs to be taken with a big pinch of salt.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 3, 2009
The Dow closed up marginally by almost 64 points today as some investors started reallocating out of bonds and back into equities.
Bond yields rose across the board today as investors reallocate out of the extremely low bond yield and back into equities. Investor sentiments were dampened in early trading as jobless claims failed to beat expectations, raising concerns about tomorrow's Job report (see Stock Market Calendar). Why isn't jobs coming back in a big way now that everyone's talking about economic recovery for so long? Well, the truth is, economic recovery does not mean economic expansion! The recovery process is a long one which goes from economic numbers slowing their decline to economic numbers going stagnant and then to economic numbers heading back up. After the numbers are up and business starts recovering in the economy will we see jobs come back. The US economy is still in a state of repair, not growth, which is why it is going to take a while more before people starts to feel the pressure ease in their pockets and their lives. Investors are also cautious going into the labor day long weekend, which is why trading volume has been way below average these two days as well. Consensus is calling for unemployment rate to hit a high of 9.6% tomorrow.
On the technical front, this is yet just another sideways day for the Dow. Yes, every big down or up day will be followed with a few sideways day before deciding which direction to breakout. In such setups, the inclination would be to breakout in the direction of the big candle. In fact, the Dow looks like it is repeating what it did back in 18 June. Short term bearish momentum continue to rise and investors continue to be cautious. Odds continue to favor a downside breakout like it did back in June.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 2, 2009
The Dow closed down marginally by almost 30 points today as more investors rushed into bonds, depressing bond yields, on future inflation worry.
Yes, the Dow sold off near the close from the positive territory into the negative following the FOMC minutes (see Stock Market Calendar) which seems to suggest potential higher inflation going into the future than previously expected. Indeed, it would be counter-intuitive to expect a low or no inflation scenario after so much liquidity has been pumped into the financial system. The golden rule remains; More Currency, Less Value. Inflation is a worry during every economic expansion cycle and is a reality that needs to be accepted. Selling off stocks just because of inflation fear only makes you miss the growth created by economic expansion. Today's rush into bonds depressed bond yields across the board, bringing long term bond yields below the 4% mark. This is a point low enough to make equities look attractive once again as yields that low cannot be expected to beat inflation. Lets see if that spurs a return to equities for the rest of the week.
On the technical front, nothing really happened today. Like I always said, a few sideways days following every big up or down day is the norm. So a sideways day like today following yesterday's ditch is no surprise at all. The Dow continues to trade along its 30 days moving average with increasing short term bearish momentum. In fact, it is shaping up to look like an intermediate pullback like we saw back in Late June/ Early July. Yes, in a weak bull market such as this one, periodic significant pullbacks are to be expected, which is why I mentioned that investors should keep a mid to long term perspective on the market right now.
For now, the Dow remains in all out bull trend.
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US Market Today - Mr. OppiE (Author Profile)
Sep 1, 2009
The Dow closed down 185 points today in a tidal wave of selling despite great economic numbers. In fact, today's drop is the hardest single day drop since this new intermediate bull trend begun back in July.
Today's technical sell off is a massive and broad based one without at negative news in the wire to support such a "panic". In fact, all the economic numbers today were fantastic! ISM index turned above 50 for the first time since this economic crisis begun, beating expectations and indicating economic expansion. Yes, this is the first sure sign of economic expansion in this economic crisis. Pending home sales index also rose, indicating renewed investment activity and a recovering housing market (see Stock Market Calendar). In fact, these are the best economic numbers that has been released so far in this economic crisis, so what really happened?
Looking at the chart of the Dow, it becomes clear that today's drop was merely a technical pullback taking the Dow back down to its short term support level indicated by its 30 days moving average and off its short term overbought condition. Yes, in a weak bull trend like this one, it is no surprise for the Dow to visit its short term support frequently or to stage intermediate pullbacks as we have witnessed this whole year. Yes, the VIX did surge today but it was not supported by the Put Call Ratio which merely nudged up marginally. This goes to show that the "panic" everyone was thinking about certainly didn't hit the options traders. In a weak bull trend like this one, I would prefer to keep my eyes on the mid to longer term and not be overly concerned with such short term technical volatility.
For now, the Dow remains in all out bull trend.
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