More Signs Of Economic Pickup!

FUNDAMENTAL ANALYSIS
Stocks staged an encouraging rally today as the Dow closed up 126.81 points. A renewed wave of investor confidence flooded the market as bond yields begin to drop, mergers begin to pick up and the ISM index beat analysis estimates. The ISM index for June turned in at 56.0 with estimates at 55.0, which is the highest in 14 months! What does this mean? This means that the US Economy is expanding at the quickest pace in 14 months! A reading above 50 denotes an expanding economy and a reading below 50 denotes a contracting economy. Sound economic fundamentals are always the pillars of stock market expansion. To this point, I remain optimistic, for now.

TECHNICAL ANALYSIS
The Dow established a floor for the sideways channel today with its rebound. It now seems obvious that the Dow might trade within a 13250 - 13700 channel until the weekly 30MA line catches up before a real, sustained rally can happen. However, this is not to say that it will not start to do so now. Now that we have the channel floor and ceiling established, a break above the ceiling on strong volume can be deemed as a breakout and the start of a rally.


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