Dow Bucks Poorer Than Expected Economic Data

The Dow gained 60 points despite worse than expected economic numbers.

Fundamentals
The bulls continued to power ahead today despite worse than expected results on several important economic data. Of note is the huge dip in the Empire State Index from 3.05 last month to -1.43 this month. This is the first negative showing on this Fed watched indicator this year. Despite this poor showing which suggests a flatlining in the manufacturing sector, the market continued to power upwards, baffling investors who actually returned to the safety of bonds, depressing bond yields across the board. Indeed, the market can remain irrational longer than you can remain liquid. However, if economic data continues to come in poorer than expected, the market shouldn't be expected to hold up against them.

Technicals
At this point, the Dow has completely erased all previous hints of an intermediate correction and has resumed a strong bull trend. How far can this run before an intermediate correction hits? That's everyone's guess and as a trend trader, it is not up to us to make predictions. All we do is read the quality of a trend and trade according to it. At this point, there is nothing in the books to suggest any short term possibility of a significant correction.

For now, the Dow remains in all out bull trend.

Market Mixed Despite Better Than Expected Numbers

The Dow lost 26 points today despite better than expected economic data.

Fundamentals
Better than expected retail sales figures announced before market opening today failed to offset the effects of the Fed announcing a slow down in its asset purchase program. Market opened lower but found some pockets of strength, allowing it to close mixed with the Nasdaq posting insignificant gain by the end of the day. Looking at the bond yields and the total equities put call ratio revealed the same level of short term indecision and uncertainty. The market might have survived the "Sell in May and Go Away" so far but that has only led it to becoming even more undecided for the short term as investors struggle to find good entry points.

Technicals
Indeed, corrections are actually a good thing for the market as a short and hard correction leads to better entry points that encourage the kind of buying for healthy new highs. The longer a correction is put off, the harder it becomes to invest or trade and the harder the eventually correction will be. From here on, a revisit of the 30MA is definitely in the books next for the Dow but in order for the market to continue upwards in a healthy manner, the intermediate correction needs to happen and it all depends on how well the market holds up at its 30MA.

For now, the Dow remains in all out bull trend.

Rally Continues Deeper Into Overbought Territory

The Dow gained 48 points today as positive sentiments created by the better than expected jobs report last Friday continues to hang in the air.

Fundamentals
The Jobs report last Friday was the only surprisingly positive piece of economic data so far these past few weeks but it was enough for the market to rally on since its release. However, the higher the market goes at these levels, the more dangerous it becomes without a good intermediate correction to set up healthy entry points. In fact, we are not seeing the kind of bullish enthusiasm from institutional investors these past few days even though the market has been rallying. My Star Trading System has also been detecting more bearish than bullish signals from individual stocks over the past few days. All of these tells me to be very careful about how to interpret the current rally. As I always say, the longer an intermediate correction is put off, the harder it will eventually hit. It is still time to be very cautious.

Technicals
The Dow has erased the last bearish divergence signal that was supposed to set up the intermediate correction by beating the April high and bringing the short term stochastics into higher territory. However, this also means that the market has merely become even more short overbought and even more dangerous. I would definitely not be newly long right now.

For now, the Dow turns a short term bull trend within an intermediate and primary bull trend.

Beginning of the Intermediate Correction...

The Dow took a huge 138 points hit today as economic data continued to worsen.

Fundamentals
In continuation of the trend of worsening economic data, both the PMI and ISM turned in worse than expected today, leading to a huge sell off. PMI was significantly lower than last month and ISM posted its second straight down month, pushing it ever closer to the 50.0 line. These led to a decidedly negative sentiment in the market right off the bat. The Feds also failed to do anything to change the situation... in fact, they did nothing at all. Investors rushed back into the safety of bonds while options traders continued to keep total equities put call ratio around par in a vote for uncertainty. All of these are coinciding nicely with the arrival of the month of May when investors typically "Sell in May and Go Away" after a good first quarter of the year.

Technicals
As expected, the Dow never beat the April high and therefore erased the bullish continuation pattern, forming instead the dreaded double top formation. Such a clean double top is extremely dangerous at the top of an extended rally and particularly so with so many fundamental reasons behind it. However, the Dow needs to close below its 30MA in order to confirm the double top formation. With the final bit of strength around the 30MA, I won't be surprised to see the Dow hold up a small positive day tomorrow as some bargain hunters step in. However, such bargain hunting should not be able to hold out against the coming intermediate correction which should happen as soon as next week. This was exactly the same pattern as back in 2012 where a good first quarter run led into a strong intermediate correction in May, yes, the proverbial sell in May and go away. There is little doubt left that this will be the exact same pattern this year.

For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.

Bull Trap Day?

The Dow gained 106 points today despite continued worsening economic data.

Fundamentals
US market was decidedly positive on this second last trading day of April despite economic data continuing to turn in worse than expected. However, on closer investigation, the market today wasn't really as bullish as it looks. Trading volume was the lowest this month so far, giving very little credit to the move today. Investors also didn't reallocate strongly back into equities from bonds like what truly bullish days should be like. Options traders also didn't get onboard as they continued to keep total equities put call ratio in the uncertainty range. All in all, today's bullish day looks more like a bull trap before the "Selling in May and Going Away" begins.

Technicals
If its not for the reasons above, the Dow truly looks like it has completed a bullish continuation pattern. The Dow also failed to beat the April high, which is an important level to break in order to confirm the bullish continuation pattern. All in all, the intermediate correction looks set to start at around this level and I would definitely not be newly long right now.

For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.

Sell In May and Go Away?

Dow gains 24 points today on better than expected Jobless Claims.

Fundamentals
Jobless claims turned in far better than expected today, turning in 339K vs consensus of 350K. This release comes as a great relief to investors besieged by worsening economic data for weeks. Investors reallocated back into equities, raising bond yields across the board slightly and pushing the market to its intraday high in the morning session. However, it doesn't take long for short term profit takers to step in and take the market back down in the afternoon. Indeed, traders are currently selling into the strength on the uncertain short term outlook. A single good economic data just isn't going to change the whole picture. Options traders continued to keep total equities put call ratio near par in a vote for uncertainty and the VIX also turned in positive today rather than negative. Whenever the VIX turned in the same direction as the market, it puts a question mark on the move for the day. In a truly bullish day, the VIX should be negative rather than positive. All of these suggest that today's positive day may not truly be all that "positive".

Technicals
That immediate drop into a intermediate correction that I mentioned on Monday didn't happen. In fact, the Dow managed to get back above its 30MA but failed to make a new high. Indeed, getting back above the 30MA isn't necessarily a good thing for the market as it only builds up even more uncertainty and denies good entries. In fact, all it does is to set up exit points for the more savvy investors before the inevitable intermediate correction hits and that was what we saw in the market today. Yes, the intermediate correction is still in the books and the longer the market struggle against it, the harder it will eventually hit. I won't be surprised with the market turning around from here and go back below the 30MA line when investors "Sell In May and Go Away". Yes, it is the dreaded May Phenomena which usually hits when the first 4 months of the year are bullish. The intermediate correction might tie in with this phenomena this year and this is definitely no time to be newly long for short to mid term trades.

For now, the Dow remains in short term neutral trend within in intermediate and primary bull trend.

Dow Struggles Against Worsening Economic Data...

The Dow closed higher by 20 points today despite worsening economic data.

Fundamentals
US market continued to struggle today against worsening economic data even after the impact of the Boston bombing begins to subside. Economic data has generally turned in worse this month so far; the poorer than expected Chicago Fed today led the market to a volatile opening that saw the Dow sink almost 100 points lower in the morning. However, bargain hunting stepped in quickly and brought the market back up to par by the end of the day. Economic data also hit periods of volatility even in a recovery, just like stock prices, and we are clearly in one such period. Options traders continued to express short term uncertainty by keeping total equities put call ratio around par while yields on some midterm bonds drop as some investors reallocate to the safety of bonds. Overall, even though it is technically a positive day, the undercurrent is definitely anything but positive. Uncertainty continues to be the theme for the short term.

Technicals
The Dow made nothing more than a sideways day today. It is now crawling dangerously beneath its 30MA which can easily and quickly sink downwards into an intermediate correction and it takes just one negative day to do that. With the market futures already pointing downwards, chances are high that tomorrow would be that negative day. If it is, then there is little doubt left that this might be the start of the intermediate correction that I have been talking about for a couple of weeks.

For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.

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