Is the Stock Market Rally Over?

By: CaraTan   Date: 24 June 2009

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CaraTan

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New York, US, 24 June 2009. The Market Rally that started in March may finally be over, having got ahead of itself - and the economic realities that we still face. As markets have tumbled this week, the technicals have started to come in-line with the fundamentals.

Is the Stock Market Rally Over?

Is the Stock Market Rally Over?

The Dow Jones Industrial Average in particular has tried twice to get past its 200 Day Moving Average (200 DMA) and failed. Its last failure led to the biggest drop in two months with increased volume, and with the MACD and RSI indicators pointing downwards – all strong bearish signals.

The price action is now squeezed between the 50 Day Moving Average and the 200 DMA, which are due to meet around the end of June. The market is then likely to have a strong move either upwards or downwards. At this stage, the smart money is on a downward run, probably down to the 7500 – 8000 range.

Are there bullish spots still left?

China and technology come to mind.

“China is having a good recession,” said EconomyWatch.com Chief Economist Hosni Afleck.

“It is using the recession and its stimulus package to carry out much needed restructuring, including boosting domestic consumption, building next generation green, tech and logistics infrastructure, and clamping down on provincial corruption. It also re-calibrating its relationship with the US, taking less heat and being more forceful in its criticisms of US policy, as it grows into its new economic superpower role.”

“Tech is also very interesting. After years of absorbing the glut created by the Dot Com fallout, there is once again solid demand for new productivity enhancing – and environmentally friendly - technology, and this sector will play a key part in the recovery.”

“Despite the Dow’s worries, Nasdaq crossed its 200 DMA in May and has now established that trendline as its new support level.”

Oil may also be a strong investment right now, but it is fraught with some many risks and uncertainties that it is hard to make solid predictions. It is not for the feint of heart – and unfortunately, nor will investing in the $INDU be for the next quarter or two.

Juan Abdel Nasser, EconomyWatch.com

 


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