ZLBT Chats

Wednesday, April 1, 2009

Current Dow Concerns

Dow may need to find a less steeper ladder to scale equities mountain
While our key support of 7,500 did manage to trigger a rebound in the Dow, the Dow’s performance last night raised some fresh concerns.

Dow Exhausted ?
The Dow burst out through the gates and went up as much as over 200 points last night, before losing some ground to chart an only positive 86.9 point gain. The last 2 hours dip of the Dow has raised concerns that traders are generally not optimistic about the Dow in the near term.
The Dow has now charted two consecutive days of lower highs, which points to the possibility of a mini downtrend forming. Taking about downtrends, the Dow is also still stuck in a downtrend channel that originates from the end of last year.

The key to the Dow bulls’ reluctance : Negative US Employment Data this Friday What could possibly be the trigger for the bull’s reluctance? The possible trigger for the bulls’ reluctance could possibly be the critical US employment data which is due this Friday. Economists polled by Bloomberg are expecting the unemployment rate to worsen to 8.5% in March compared to 8.1% in February. The upcoming negativity of the employment data could adversely affect the Dow in the next few days.

Strategy : Downgrade to cautionary positive view of Dow
Although we still maintain our positive view of the Dow, the technical cautions that we detected in the charts necessitates a downgrade of our view of the Dow to Cautionary Positive. We expect the Dow to face another wave of correction in the next 1-2 days leading to the release of the US employment data. We expect the Dow to correct to the 7,000-7,250 support zone. The near term correction of the Dow will drag the KLCI 20-30 points lower in the next 2 days.

We think that the Dow bulls have to find another new and less steeper ladder or uptrend line that is easier to sustain to scale the proverbial equities mountain. We think that the 7,000-7,250 support zone will be a fine area for the bulls to plant this new uptrend ladder.

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