MARKET COMMENTARY

The Dow acted within expectation; i.e., making a minor rebound. However, the volume shrank. So, it isn’t indicating anything other than some short-sellers covered shorts. If the market is still in the bearish mood, it may pick up what was left out on Tuesday. Now, most people are going to look at oil and financial news for more leads in market. Consequently, the stock market will remain highly volatile in the days and even weeks ahead. Traders must stay vigilant and stick to really short-term play if you are good at it.

Dow chart shows that we may be in for a trading range between 11,000 and 11,800. This view is further enhanced by the way the RSI is moving. It basically oscillates between 40 and 60 range. This is a strong sign of trading range. In the mean time, directional traders can rely on reversal strategy to make short-term profit. Options traders can choose Iron Condor, Double Diagonals, Calendar Spread, or Butterfly as primary strategies for the near-term. These same strategies will work for the S&P as well.

DJIA Daily Chart

The Russell was more volatile that the Dow on Wednesday. It ended the day with a spinning top. This is just a candlestick sign of staging - a continuing pattern. If this is true, we can expect the market to head down on Thursday. Real support is found on 710 level.

RUT Daily Chart

NDX is harder to predict than other indexes. It had established itself to be bullish the overall impression of the financial market is bearish. Therefore, the current retracement is not telling us whether it is still bullish or on the way down. We can only find out more in the days ahead.

NDX Daily Chart

STOCKS TO WATCH:

Watch out for housing and financial stocks to get hit again.

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