Analysis of US stock market situation
Amid a sluggish U.S. job market, a patch-work recovery in the housing market sector, and now damage from Hurricane Irene, it's understandable if U.S. investors are hesitant regarding deploying new money to the stock market.
Conclusion regarding where the Dow Jones is headed, near-term:
Technical Indicators: Neutral. The Dow is firmly below the 50-day (11,937) and 200-day (11,988) moving averages -- which is bearish. However, the Dow, as noted, did hold support at/near 10,700.
Fundamental Indicators: Slightly Bearish. During the second quarter earnings season, corporate earnings were adequate to slightly better than expected.
Monetary Policy: Bullish. Inflation remains low, at the core level (which excludes food and energy prices). Fed will at least continue to reinvest the proceeds of the second stage of it's quantitative easing policy to help stimulate the economy.
Fiscal Policy: Bearish. The U.S. Congress, led by the Tea Party-pressured Republican majority in the U.S. House, implemented austerity measures too soon.
Credit Markets: Recovering, but still strained, with still too many small/medium-sized businesses arguing they're not getting the level of credit they need to expand operations. Home mortgage qualifications terms remain very high.
Europe's sovereign debt situation has improved somewhat, but there could be more financial market ripples if Portugal or Spain require a bailout. So far, each has said they won't need outside intervention funds.