Economy Continues To Contract...

FUNDAMENTAL ANALYSIS
Stocks came under heavy fire today as the ISM manufacturing index turned in far weaker in Feb versus Jan and under the 50 mark once again. The ISM manufacturing index or Institute for Supply Management manufacturing index, is one of the most closely watched economic indicator for its significant history, timeliness and authority. In fact, the ISM index is the first piece of economic indicator to hit the tape every month. It is a survey on purchasing managers in the manufacturing sector across the country to arrive at an indication of how the manufacturing sector is doing. There are many ways to read this index and the simplest is that if the index is above 50, the manufacturing sector and hence GDP is growing and a reading below 50 indicates a contracting manufacturing sector and hence a contracting GDP. Today's ISM number for Feb turned in 48.3, down from 50.7 in Jan and you won't need me to tell you what that means, do you? Contracting ISM index is always bad for stocks and the dollar. It is bad for stocks as investors sell into the gloomy outlook and bad for the dollar as foreign trade partners sell the greenback into the economic weakness. Such weakness continued to fuel the bubble in the commodities sector, especially Gold and Silver, which are special commodities used for wealth protection. However, why did stocks stage a late day rally? Well, the reason is simple... investors already know that the economy is teetering on recession and that much of it has already been priced in. In fact, like I mentioned yesterday, many institutions are actually buying into bad news and selling into good news and today's market action proved that point. Well, the next heavy weight release would be the Job Report on Friday (see economic calendar). Job Report is the grandfather of all economic indicators and always put pressure on the market if it disappoints.

TECHNICAL ANALYSIS
Another sideways day today, marking a full month of sideways movement in the Dow. Great news is, sideways movements rarely last for more than a month and I think we should see a break out pretty soon BUT not without first visiting the Jan lows. Yes, I still stand by my visitation of Jan Lows view.