Signs of the Bottom...

An extremely encouraging economic data hit the wires today and that is the huge surge in new Durable Goods Orders (see stock market calendar). New orders beat a negative consensus and surprised the market with a huge upside surge of +3.4%. In fact, this is the BIGGEST surge in durable goods order since this crisis begun. Durable goods order is a leading indicator of corporate sales in the near future as orders turn into goods and goods into revenue. A big turn around in durable goods order certainly marks increased economic activity, which is a great thing right now.

The Dow responded optimistically to the news before the market came under profit taking pressure. Yes, with the recent short squeeze done, short term speculators would certainly want to take some profit off the table ahead of tomorrow's uncertain GDP number. Even though the Dow closed the day higher by almost 90 points, it did not beat the high made two days ago, making today's move yet another sideways day. Certainly, it is not unusual to see a few sideways days following every big surge or ditch. Average trading volume has also declined significantly these few days, signifying the end of the rush caused by the recent rally. This is the time investors re-evaluate what's going on and decide on the way ahead. Accordingly to textbook, we should see more profit taking pressure over the next few days, challenging the integrity of the 7500 support level. If it holds and swing traders or long term investors step in, this could complete an intermediate reversal, which can be VERY significant.