Heavyweight Week Ahead!

It's the first week of a new month again... the first week of April 2009. Every first week of each new month is a heavyweight week with the most important economic data being released (see stock market calendar). Again, we have the ISM index on Wednesday and the all important Job Report with the unemployment rate on Friday. Something tells me that the numbers are going to be more important than ever this time round. Maybe we would see unemployment rate go down at last, sealing in the peak unemployment rate at 8.1%? Seriously, I don't think so. It takes more time than just 1 month for all the job creating effort to show up in the numbers. But will we see a peak number that encourages buying? That's the question. The ISM index is going to be interesting. From its recent trend, it seems to have bottomed out in January and recovered steadily the past couple of months. If the ISM index beat expectations again this time round and continue up, it could lead the GDP higher soon.

How time flies, the first quarter of 2009 has ended. Q1 2009 has been a closely watched quarter by analysts worldwide for signs of bottoming and economic stability. In fact, the market did not disappoint. Q1 2009 has ended the Dow in a huge bottom hammer formation on the quarterly charts. This is a classic reversal candle signifying that the selling so far has run into strong buying resistance. In fact, this is the first reversal candle on a quarterly basis for this crisis so far. It is also the 6th consecutive down quarters for this crisis. In fact, from the Dow chart, we can see that the Dow has channeled within 9000 - 7000 points for the past 6 months, which is evident that the free fall period has ended. Indeed, as the Elliot wavist and the Fib guys have it, the 3rd wave down is the strongest and since that 3rd wave, the bears have been losing their hold gradually.

The recent relieve rally really does look more optimistic than it should be. 3 straight weeks of gains without a significant retreat or pullback. This only makes it look too sweet to be true and that when the pullback comes, it will certainly challenge the 7500 level in a big way. If the 7500 level holds, we could witness a classic reversal according to the Dow theory. Otherwise, a journey back to the bottom of the chart will be in order. Volume going into this relieve rally has also died down significantly over the past week as investors gradually lose enthusiasm and interest in the "rally". The Dow has also ran into the 8000 points resistance level, which used to be the support level in Feb. This tells me that we should see the pullback happen this week. I am hoping for the pullback not because I love to brag about how this is a bull trap as I have expected but that I need to see where the Dow finds support on that pullback. It will be extremely critical for where the Dow would be heading going forward. For now, the Dow has not only turned short term bull trend but it has also reversed into an intermediate term neutral trend. Lets see which way the neutral trend breaks out.