Dow 12050 taken out today
With an intraday low of 12036, and I was surprised, having closed my shorts early. I didn’t expect 12050 to be taken out this fast, with such a force and speed, a big long, engulfing and black candlestick.
The suprime mess continued to scare financial market, including CDS market:
iTraxx Crossover 10 Y, jumped up about 2% to 313.08 and it was 340.88 on 030507;
DJCDXNI jumped 1.1% to 34.01, and it was 37 on 030707.
So, “risk aversion” is running full steam now.
Where Dow would go from here? It will partially depends on the re-evaluation of fundamentals, including growth and inflation, in the next few days, and possibly any further unwinding of yen carry trade. Is “stagnation” going to come back?
Chart wise, Dow’s next support line is 11670, intraday high on 05102006, about 400 points away.
Looking at 10 Y Treasury yield index chart, today’s close of about 4.495% was just 25 base points from 4.25% YTD low on 12042006. How low it could go? It will depend partially on how fearful the financial market is.
From bear's point view and TA wise, as long as bulls are not scared to death, which would be the panic or capitulation point for the possible reversal, there is still money to be made on downside. Then why not?
Where would be the capitulation point? We all have to guess, and let’s see how Asian market and Yen reacts tonight.
