ISM Beats Oil...

FUNDAMENTAL ANALYSIS
The ISM manufacturing index beat expectations today as it turned in at 50.2% for June, indicating an expanding manufacturing sector, versus 49.6% in May. This number beat analyst's estimates of 48.5% hands down, closing the Dow marginally higher by 32.25 points despite oil making yet another new high. Yes, the great ISM number beat oil to it today but just barely. The pessimism and the bear mood in the stock market is so entrenched that it takes a lot more than just one great number to turn things around. How about another great number this Thursday? The All Important Jobs Report? (see economic calendar) Well, a series of good numbers in this holiday shortened week might just rebound the Dow a little but with the market already in bear mood, I see nothing more than just a dead cat bounce. As long as oil remains a problem, any rebound in the stock market cannot be expected to result in a sustainable, long term bull trend. For now, investors pessimism are also reflected in the falling bond yields across the yield curve (see bond yield curve here) as large institutions rebalance their portfolios for more safety.

TECHNICAL ANALYSIS
The Dow formed a hammer candlestick signal today and such a signal occuring after a significant retreat indicates that the bulls are beginning to beat the bears at last and that things might turn around soon. A hammer candlestick signal is formed when the bulls close the day slightly higher than the opening after the bears take it a lot lower intraday. It is a candlestick shaped like a hammer with a small head and a long handle, hence the symbolic name. The longer the handle, the stronger the signal (and yes, today's hammer doesn't have an impressively long handle, so don't bet on it performing 100%). Indeed, the Dow is long overdue a dead cat bounce and this might be where it rebounds a little amidst all the positive economic data before the bears take things lower again. Intermediate bear trend is still strong and any rebound within such a framework can only be construed as a short term relief rally, don't be fooled. If the Dow rebounds, immediate resistance would be on the March low of around 11750 with a bear trend resistance at around 12000.


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