Thursday, October 08, 2009

Stock market action for Oct. 8, 2009

It looks as though no determination has been made yet as to which direction the breakout will make on the Dow. Yesterday the Dow closed at 9725, down only 5 points. This was not enough to make a comment. Today the market is poised to go up because of upbeat earnings report from Alcoa. Retail Sales also came in down but not as bad as analysts said they expected. That surely will aid in the pop up today. And finally weekly jobless claims were down again as was Continuing claims, which was at 6.09 Million jobs. Now pay no attention that these numbers are in fact not true because those not filing claims as they give up looking or don't file as their benefits have run out, but the data shows a decline and that's all that counts. So the "W" pattern has not yet had a breakout either down or up. It may take until the end of next week for the answer as Options expiration for October occurs then.

The chart above shows I have added a second Blue line which depicts the tighter range we need first to break out of and then the second lower Blue line which will signal a correction. This is determined by the Dow closings above the resistance level of 10,000 or lower than the top Blue line and above the lower Blue line, we will have no determination of direction for the market unless we break below the bottom Blue line or above the Red line.

On a related topic about whether the stock market is reflecting where the economy is headed, I was at a town hall CITY COUNCIL Meeting last night where the topic was on housing requirements looking forward to 2014 and the town was projecting a certain number of new homes needed to be built for the expected growth the town calculated they would need. The conversation lasted about an hour before it was open to Public comments and one person got up and asked the question about the elephant in the room. It was this: "Has anyone looked recently at current predictions about economic growth or lack of it over the next 5 years? People are leaving California and businesses are closing. Do you really think in 5 years this is all going to be solved?" There was a hush in the room as many finally got it. The same is true about the economy and the stock market. No one is listening to the comments in those areas about the elephant in those rooms/

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