Is this a timely intervention by the government?

The stock market across the world rallied on Monday because the United States government bailed out 2 of the biggest mortgage lenders in the US. The bail out offered a relief to the investors across the world because if these 2 companies had been allowed to go under it would have had a devastating effect on the US and consequently the world economy.

The bail out came at a time that the bears were getting ready to push the market lower.

Remember I said the Dow will test the 11200 level and then try to test 11000. Well it tested and touched the 11200 level but pulled back around 11100. On Friday the Dow formed a hammer, giving indication that the market might reverse to the upside. At that point even the swing trader bears would know that all shorts on the Dow index are off, even if temporarily. Note that individual shares and sectors can paint a different picture as some shares rise when the overall market is falling and some fall when the overall market is rising.

My current stance on the Dow is that it is in a sideways range, it has to either break through resistance or below support to confirm the next up or down trend.

I’m not a fan of trading the index, I’ll rather trader movements in stocks mainly because I don’t sit in front of the computer screen all day and I haven’t got the stomach for large swings associated with index trading. Whatever you decide to trade or follow, remember to pay attention to the details.

All the best