Bond Traders Enter, Dow Rebounds...

FUNDAMENTAL ANALYSIS
The Dow rebounded from its 8000 points short term neutral trend support today, apparently out of no reason. The better than expected pending home sales number and retail sales (year on year number was down though) did not spur any buying as the Dow opened the day with a mild sell-off. Looking at the intraday market action, the Dow rallied after 1pm without any significant news. In fact, the financial sector did not do well today either, making it all the more impossible for a rally. In my search for clues as to what happened, the surge in Bond Yields struck me (see bond yield curve). It seems like bond traders has once again provided support at this critical juncture. In fact, bond traders has been reallocating assets over the past month, providing good support to the equities market.

Tomorrow's challenger job cut report and ADP employment report would shade some light on how this Friday's Job Report would turn out to be (see economic calendar). Lately, investors have been over-reacting to the ADP number and under-reacting to the actual unemployment number in the Job Report, suggesting the rising importance of the ADP report. If the ADP report turns in lousy, it could be expected that investors could once again over-react to it and then under-react to the actual unemployment number again.

TECHNICAL ANALYSIS
On the technical front, the Dow's rally today did nothing to change the fact that it is still around the 8000 points level and still in danger zone with short term bearish momentum still existing. It certainly need a follow up tomorrow to erase the previous short term bearish momentum and keep the short term neutral trend safe.