Hear The Bulls ROAR!

FUNDAMENTAL ANALYSIS
As I have expected yesterday, the Dow exploded upwards by 391.47 points on better than expected ISM number!

As I mentioned yesterday, we wanted oil and gold to break short term support and for the ISM index to turn in better than expected and HAAAAALLLLLEEEEELLLLLUUUUJAH! We got both of them today.

Have you ever seen footages of volcano eruptions on TV? If you have, you would have seen those thick smoke and occassional magma spewing just before the grand eruption occurs. I think we are seeing the smoke and magma coming out of the stock market now and that the bulls may just erupt without warning, at least right up to the Jobs report this Friday. Oil and gold continues to get beaten down today, further reinforcing my last straw scenario (see my posts over the past few days). In my post last Thursday, I have already warned oil and gold traders against speculating for new highs and yes, since that post, both commodities have gone south.

Seriously, what surprised me was the readiness and the bullishness in the market even before the ISM numbers were released today! With or without the number, the market was rearing to go! The bulls are raging! This is situation is somewhat unseen of, at least in my professional life as a hedge fund manager.

The ISM index, or rightfully known as the Institute of Supply Management Manufacturing Index is an index measuring manufacturing activity in the US with readings above 50 indicating an expanding economy and readings below 50 indicating a contracting economy. So, what makes the 48.6 today a bullish number? It is a bullish number because the index was at 48.3 in February! The index gained 0.3 points this time round for the month of March, which again reinforced the fact that we have narrowly missed an academic recession and is going into the recovery phase!

So, let's take stock of all the reasons why the bulls are going to erupt so far:

1. Recovering ISM index
2. Oil and Gold getting beaten like dogs
3. Consumer Sentiment index collasped (its always grimmest before dawn)
4. Fed bailout of BSC is demostration of their resolve not to allow the financial system to sink.
5. Existing home sales rising suggests possible start of the bottom in housing market.
6. Extremely steep bond yield curve suggests that smart money needs to move back into value stocks soon. (which is already rising as money moved back to equities from bonds)
7. GDP has not gone negative despite widespread speculation on an academic recession.

As I mentioned the first time I raised the eruption theory back on 23 March, the force of an eruption is proportional to its pent up period and yes, stocks have been pent up long enough and the eruption could take the bears by surprise. Those of you who took a toe dip using stock options like I have recommended over the past week, would have made some safe risk-limited profits. Hang in there and keep the faith!

TECHNICAL ANALYSIS
The Dow rallied 391.47 points, not on a volume surge but on a sensible rising volume! That made a world of difference! In fact, we had 3 single day rallies of over 300 points this month so far (including today's) and every of those makes higher highs and lows, which again, is extremely bullish. That proves that the bulls are increasingly optimistic while more investors from the bear camp re-examine the situation. Like I mentioned yesterday, a break upwards today would spell a visit to the 12750 resistance level. That was an extremely strong resistance level that brought down 2 previous relief rallies on 4 Feb and 28 Feb. What I would like to see is a strong follow up tomorrow which takes the Dow straight above the 12750 line like it doesn't exist. After that, we should see a slight pullback down and then a new bull trend starts. :) I am at my most optimistic since this crisis started so let's start the ball rolling!


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