First Signs of Recovery...

The Dow gained marginally by 38 points today, retreating from an almost 150 points intraday advance, on the first signs of economic recovery from leading indicators and existing home sales. Leading indicators, which is an index on a set of forward looking economic indicators, beat analyst expectations (-0.3%) by a mile for December, turning in an actual figure of positive 0.3%! Even though leading indicators has not shown a very strong correlation to stock market turning points, it sure does tell us that something is changing in the economy right now, that things aren't quite the same as it was when this crisis started anymore. Existing home sales also turned in one of the best numbers ever had for years! This shows that investments and purchasing are returning to the housing sector once again, which is a bullish sign for the economy. Even though these 2 numbers may not indicate a turning point in the economy nor the stock market, it does tell us that the economy may be at a point where it can begin to find some stabilization. The beginning of stabilization is marked by yet more closing down of non-competitive firms and more lay-offs but certain business fundamentals are beginning to attract investments and purchases. Investors will now look forward to what the Fed could possibly cook up on Wednesday's FOMC announcement (see economic calendar). Consensus is for leaving rates at the present level of 0 to 0.25% (we all know that, don't we?) so investors will probably be focusing on what Uncle Ben says about the economy for some forward looking guidance.

On the technical front, those good news merely provided the reason why the Dow had found such support near the 8000 points level and today's market action merely added another sideways candle along this level. What worries me a little here is the fact that bond yields (see bond yield curve) have been rising all month long, which is a sign of bond traders exiting the bond market and probably reallocating assets into equities, but that did nothing to bring the equities market up. This shows that there are still significant selling pressure out there, probably from disappointed "January Effect Betters".