Stock Market Analysis

Tuesday, May 01, 2007

Dow Gains On Resilient Manufacturing Numbers

explosive option trading FUNDAMENTAL ANALYSIS
The Dow gains another 73.23 points as the ISM manufacturing index bounced back in April to 54.7, gaining from 50.9 in March. The ISM Manufacturing Index is based on surveys of 300 purchasing managers nationwide representing 20 industries regarding manufacturing activity. It covers indicators such as new orders, production, employment, inventories, delivery times, prices, export orders, and import orders.It’s considered as the king of all manufacturing indices. Readings of 50% or above are associated with an expanding manufacturing sector and a healthy economy, while readings below 50 are associated with contraction. A figure below 40 is traditionally recognized as indicating a recession in the economy as a whole while a reading above 65 indicates strong growth. So, a 54.7 does indicate a slowly growing economy, which, of course, is good news.

TECHNICAL ANALYSIS
The Dow may have gained 73.23 points today but technically, it is still just another sideways day in the flat step of its staircase formation (please read post yesterday). Even though the Dow was not down todya as I have feared yesterday, it is not much better as the entire day traded within the trading range of yesterday. Tomorrow is going to be a critical day for the Dow. It is indeed due for a slight pullback due to it's weakening advance and slow down in bullish momentum in our short term MACD. However, long term bullish momentum is still strong and that makes it possible for the Dow to still persist upwards. What shall decide? Tomorrow shall decide. If the Dow ended down tomorrow, then it is all the evidence I need to go delta neutral for now. If the Dow is up another 50 points or more tomorrow, then I will go with that the staircase formation is still intact.


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