18 April 2007, EOD market commentary

The Dow extended its gain yesterday. After moving up more than 300 points in 5 days, the Dow finally broke a new record high intraday yesterday.
However even with the record breaking that happened yesterday, I could not hide my suspicion that we are due to a correction soon.
As seen at this chart,

We are at the top of the bollinger band as well as the top of the small channel. The dow is overbought now and a pullback to the middle of the bollinger band is essential toward the continuation of the bull trend.

The record breaking that Dow did yesterday was contributed by just a few companies. JP Morgan Chase & Co., Boeing Co. and Caterpillar Inc all posted great earnings exceeding analyst expectation. However there were more decliners than advancers yesterday. The Nasdaq composite index was lagged by bad earning from Yahoo and IBM.

Yahoo was down as much as 11.78% and IBM 2.38% weighted the Nasdaq to go higher.
The bull euphoria these past 5 days might end soon, as right now the Dow futures is trading about -70 point below fair value. Another sign is given from China, Shanghai Index went down as much as -4.5%. This is their biggest drop in many weeks.

That drop can lead to a sell off, like it did on late February. Well the odds right now belong to the bear for a pullback. Let's see whether this pullback lead to a sell off or just a continuation of a bull market.


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