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November 14, 2014

Is This A Bullish Price Correction of the U.S Market?

By Nicholas Kitonyi

Over the last few weeks, the U.S equities markets have embarked on a rally after undergoing a leg-down plunge between mid September and early October.  

Many analysts might have predicted an inevitable pullback following the recent rally of the three main indices.

However, it appears as though the current valuations are in tandem with the main trend and might actually be a matter of a bullish market correction, rather than a run waiting for a fallback.

DJIA Goes On A Run

Chart via Quantshare.com

Since early October, the Dow Jones Industrial average has experienced a sharp rise in price rallying from a low of about 16000 points to the current level of 17614.

While this might appear like a massive gain that could soon plunge, when looking at things from two months ago the picture appears to be different.

 In September, the DJIA traded at well above 17000, and therefore, the current rise seems to be a market correction after the recent plunge that sent the index trading well below 16000 in early October.

SPY Remains Steady even after breaking out from recent highs

The SPDR S&P 500 ETF (SPY) has recently broken from its immediate resistance zone following an impressive series of U.S economic data that began with the closure of the Quantitative Easing (QE) program late last month.

In the last two weeks the U.S also announce impressive economic growth rate of 3.5% which beat analyst estimates of 3.0%, and last week, the unemployment rate improved to 5.8%, while the jobs data also remained strong at more than 210,000.

U.S Equities have benefited a lot from recent economic data released by the department of commerce.  They also seem likely to continue riding on the same for the near future, as investors remain optimistic over economic recovery. 

However, looking at the SPY it appears as though that the current price range falls on the same trend depicted before the plunge.

QQQ Opens a gap up

The SPDR NSDAQ 100 ETF (QQQ) also appears to be rallying, driven by good results from top companies in Q3, 2014 as well as the recent U.S economic events.

The QQQ has rallied from a low of about $91 to the current level of $101, which is slightly above the initial high of about $100.

However, the difference in price between the initial high (before the plunge) and the current level also suggests that this could be a market correction as the price now appears to be in tandem with the main trend.


In general, those who are cashing out on their holdings thinking that a pullback is due in the U.S markets could be surprised at how steady the market is bound to remain for the next few weeks/months. There is a clear indication that this rally could continue and technical analysis suggest that the current levels are a mere market correction.  

The bottom line is that with the U.S Economy showing great improvement, the U.S equities might remain bullish until at least next month when the next jobs data comes out.

About the Author: Nicholas Kitonyi
Nicholas is a financial analyst by profession currently working at QuantShare.Com, a trading software provider. He is a tech enthusiast with a specific interest in trading software, business applications and gadgets.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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