MARKET COMMENTARY

Dow gapped big upon opening but only to see it falling back mid-day before closing higher. The bailouts of Fannie Mae and Freddie Mac are seen as a positive move by the US government. Nevertheless, this is a single event that sparked the rally but not a general market view. Certainly, the effect of the bailout on the financial market is yet to be seen. The negative sentiment on the market is still strong which explained the mid-day pullback. For this reason, I do not think the market will make big move on Tuesday. It will be a “hangover” syndrome - characterized by a relatively dormant market and closed with a Doji or Spinning Top.

Dow chart shows a long green bar with high volume. This usually follows with a higher close on the following day but due to the intra-day pullback it may not very much higher. This is usually the day in which traders begin to take profit; hence, holding back further advance. Depending on how the market views the banking industry after the bailout, I won’t be surprised there will be reversal if market players jitter over the prospect of the economy. There are still many bad news hanging over the stock market at this time. So, always prepare for sudden change in trading direction.

DJIA Daily Chart

The Russell surged in tandem with the Dow. However, this index is not as bullish as the Dow and S&P. The green bar was too small to suggest a stronger gain for next trading session. It should be a non-event Tuesday.

RUT Daily Chart

The Nasdaq chart is bearish. Despite the stronger Dow, Nasdaq fell. This will have a bearing on the Dow’s performance on Tuesday. I believe the Nasdaq will sink further and make new low.

NDX Daily Chart

STOCKS TO WATCH:

NIL

Subscribe to the post comments feeds or Leave a trackback