News / US Equities
Clearly, we’ve had another exciting week for the DJIA. A series of interesting news happened this past week. To give you a bird’s eye view, here are highlights of what happened: - Lehman (NYSE: LEH) filed for bankruptcy. After 158 years, LEH finally succumbed and filed for chapter 11. Talks with Barclays bogged down before they declared bankruptcy. Guess what? After the filing, Barclays came into the picture again to buy them at a cheaper price and only selected departments are bought. Sneaky Barclays. Do we now call them BarcLEHs?
- Merrill Lynch (NYSE: MER) sold its soul to Bank of America (NYSE: BAC) in an all-stock deal worth $50B. Welcome to the club said Countrywide Financial, which was also bought by BAC.
- AIG (NYSE: AIG), the world’s biggest insurer, was bailed out by the Fed. They get $85B for 80% of the company. AIG is said to be resisting this. The bigger question is who insures AIG?
- The US SEC imposed a ban on short selling for 799 financial institutions with the possibility of a one-month extension. This was a measure to stop naked short selling in the market. I guess it was also a measure to stop liquidity.
- Outside the US, Russia’s stock market had a roller coaster week. After suffering steep drops in their market where trading gets halted, it got a shot in the arm and rose around 30% and still gets halted. What the hell?
As for the DJIA itself, it was also quite a roller coaster ride. It started the week dropping by 500 points. It rallied 142 points on Tuesday, only to fall another 450 points on Wednesday. Thursday was probably the turning point all chartists were waiting for. The DJIA rose 410 points on heavy volume. That’s not the end of it. This was a key reversal day as the bar it created on this day is a bullish outside day where it made a higher high and a lower low than Wednesday. This turned the momentum of the market 180 degrees to go up. Finally as expected, DJIA ended the week up by 368 points to follow through the bullish momentum.
Interestingly enough, the 50-day moving average is still acting as a resistance for the index at 11,393. Time and again, the 50MA has been giving the DJIA a hard time in moving up. But with the current momentum of the index, this may not be a problem anymore.
The MACD’s fast line has hooked up, giving us an indication that the momentum is really aggressive and it may not be a problem for the index to return to 12,000. The MACD also shows us a bullish divergence as can be seen on the lows of the index from July to present against the lows of the MACD on the same time frame.
We see a good run coming for the short-term even as the major resistance of the index is still far at 12,500. But there could now be good trading opportunities that might present themselves.
Get ready for a blast off because even for the short-term, the bulls are back in town!
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