MARKET COMMENTARY

Tuesday was not a typical trading day. The market whipsawed throughout the day in active trading. Volume surged to all time high and closed with a three-digit gain. The entire day of trading was heavily influenced by the Federal government’s AIG bailout as well as the interest rate change. I guess the market had more or less believed that the US government would bail out the giant insurance company since AIG is one of the largest and reputable insurance conglomerates internationally. It would be a shame to the country and economically disastrous to let the company go down the road of bankruptcy. This explained the solid gain. However, the decision was only announced after market close.

Though the Dow made a positive gain, it may be too early to tell if the AIG bailout was enough to calm the market. The rebound on Tuesday could make Monday’s bearish breakout a false one. False or not will depend on what comes next on Wednesday. At this time, it is still too early to tell which way it goes. The market is still heavily influenced by the slightest news - positive or not - that would come from economic figures, employment condition, bank failures, Fed’s announcement, etc. From the technical analysis point of view, the Dow has formed a trading range pattern. If the Dow continues to head south, this range can then be ignored. Yes, Wednesday’s trading session is the D-Day for what the market will be called thereafter - bearish or sideways.

Options traders: Continue to sell your Bear Calls!

DJIA Daily Chart

Russell rebounded strongly and formed a Morning Star candlestick pattern. This is a bullish signal. However, it also faces the strong resistance right above it. The resistance is a convergence of 50- and 200-day moving averages as well as the downtrend line. In this opposing set of signals, we better stay out of the market for now until the condition is more certain.

RUT Daily Chart

The Nasdaq rebounded just as other indexes. But the bottom is still not found at this time. Wait for it to rebound higher to short the index again at its peak.

NDX Daily Chart

 
STOCKS TO WATCH:

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