What a correction!

DJ Resistance:   16.677     All-time close high

                           16.520

                           16.250

                           15.943

                           15.700     Old support now strong resistance

                           15.482     Tuesday’s high and 200MA

DJ Support:        15.350     Tuesday’s low

                           15.100

                           14.760     Old range 14.760 – 15.721

Technical Analysis:

What a correction!

DJIA is in a correction. We must try to find out if it was enough to stabilize and look for the next up move because DJ is still in a bull market. DJ has lost 1.216 points from almost an all-time high during 2014. It is 7.3% and it could be easily 10% pullback. By definition, a bear market is at 20% or more pullbacks. The last 10% correction in the Dow Jones was in 2011 and it is healthy because of the realignment of stock prices. 

The volume has increased in the last fifteen days and the bears have imposed to bulls its direction of the market. Support at DJ15.700 was shooting down during a big fight; see daily chart volume, resulting to the DJ lost 300 points in one day. Bears won that important battle. Now DJ15.721 is a strong resistance. DJ needs to overcome that level and stay over to begin to stabilize. In the short term the DJIA have to exceed Tuesday’s high and the 200 days moving average (approximately DJ15.483).

Technically, we have to watch the market forces because it is complicated to determine the market direction right now. The bull market is still in place by definition. The correction is welcome but we don’t know where its limit is and it is irresponsible to affirm something without a base. It is clear that at DJ14.760 there is a strong support and below it we would be possibly in a bear market. Do not forget the positive trend line support coming from March 2009 in the daily and weekly chart and DJ is still in the uptrend channel coming from the same date.

What I read is that Dow Jones is still in a bull market after technical analysis.

Please, click over the charts to enlarge them.

Fundamentals:

As I explained last week, the DJIA below DJ15.700 is in a correction and in a negative place. I also explained the motifs for the correction, they are still valid.

It is not clear if the last trading days are going to shift the market direction. We have faced some disappointments during this earnings season but some reasonably positive impressive too, the economy is doing well and it seems growth is for 2014 and 2015. Debt ceiling gridlock looms in February, I think this time Congress and Executive are going to get an agreement. I admire the U.S. Corporations’s rationalization they have got in the last five years; they are healthy and competitive and they did it without the economy’s help. Try to imagine those corporations working in a recovery environment.

Positions in shares have increased markedly last year,margin debt at the New York Stock Exchange rose to an all-time high, Margin debt at NYSE hit record at $444.3 billion in December 2013

Dear traders and investors, regularly January brings gains for the stock market, February and March lose conversely. 2014 began breaking this way, January was negative and the stock market lost its gains done in November and December 2013. If we enter in a correction phase it could last two months as history suggests, it is not written in stone. We have to continue working into the market and find the horizon.

Do not lose the objectivity, put emotions aside!

Good luck, viel Glueck, buona fortuna, buena suerte, bonne chance!

Ulises