Dow In Warning Phase

Global stock market has been adversely affected by policy makers in China and US recently. China decision to go ahead with plans to curb lending to prevent economy from overheating and the proposal in US to stop banks from doing proprietary trading caused global market to stage a sharp retreat.

Dow industrial average has entered “Warning” phase with the index closing below its 200 day moving average. Since moving to “Bullish” phase, the index closed below its 200 day moving average only on 2 occasions.

The manner in which the index pierced through this support line suggests that we will be seeing further weakness. For investors who are thinking of raising their bets, I suggest that they take to the sidelines to wait for clearer signs from Mr Market before putting their money into the market.

Remember to trade with the trend and make it your best friend in 2010. Happy trading!