Round 1 To The Bulls...

FUNDAMENTAL ANALYSIS
The Dow attempted to break the 13000 resistance zone today on great leading indicators just to meet strong resistance from the bears as skeptics continue to take profit. The Dow was brought down from an intraday high of 13136.69 to close 13028.16.

Leading indicators or what is formally known as the Index of Leading Economic indicators, is an index designed to predict the direction of the economy by compositing a select group of 10 economic statistics (3 financial and 7 non-financial) that historically move ahead of the rest of the economy and have a historical track record of being about 3 to 9 months ahead of the economy. The leading indicators index released today was up 0.1%, inline with expectations. What is most important is that it is up 2 months in a row now, which is definite indication of a slow economy growth ahead and not an economic contraction. That's great news! That was why the market rallied in the morning today right after the index was released at 10am (see economic calendar) So, how about tomorrow's PPI numbers? Again, investors are likely to start buying into any bit of optimistic reading and likely tone down the effects of a pessimistic reading. Indeed, there are tons of reasons to ignore pessimistic PPI readings since it is almost uncorrelated to the CPI.

We also saw clearly the optimism in the market as investors buy into every bit of good news despite oil still edging slightly higher. This again reinforced the fact that as long as oil begin a decline, the stock market would be ready for a full force rally. Can you still profit from higher oil? You can by putting just a small amount of money on the stock options of USO. Why stock options? Because oil is already so high that it is hard to see it going higher. Stock options offers you those additional profits at only the risk of the small amount of money you commit to it.

TECHNICAL ANALYSIS
The Dow certainly made a run for it today and if it had closed at or near its high of 13136, it would have represented a significant resistance level breakout and that we should be buying into it. However, the Dow actually retreated back down into the 13000 zone by the end of the day, erasing the breakout. So, the Dow is back to its critical juncture again... breakout or breakdown... it needs to choose within these few days and the longer it takes to make that move, the stronger that move will be.