Banks still in trouble...

Today, despite very healthy jobless claims numbers, the Dow surrendered yesterday's gains by retreating over 100 points after the US government released a report stating that 10 out of 19 banks are still in trouble.

Even though the economy is clearly bottoming out, most banks are still suffering from the mess that they got themselves into. Indeed, some entities can get too big to fail. Banks do need to recover from losses but through their own business activities and not from taxpayer's pockets! Ok, enough politics from me. Jobless claims beat expectations today, bringing its 4 weeks moving average down a 3rd week in a row. This is the first time new jobless claims have retreated so much in this crisis so far. Indeed, this is sure sign that the economic crisis has past its worst. So why is the market still down today? There is a combination of reasons and the most significant I can see is the bank stress test and profit taking ahead of tomorrow's Jobs Report (see stock market calendar).

In the technical sense, Dow's retreat today isn't as much of a retreat as it is for the NASDAQ Composite. The Dow merely continued going sideways but the NASDAQ composite did a significant down day that could turn nasty if followed up tomorrow. So far, such big down days have been false alarms which did not follow up the next day, however, this same thing happening right on the 200DMA does make it look dangerous. We will monitor how the NASDAQ composite behave tomorrow. If it follows up to downside tomorrow, near term support would be the 1600 points level. For now, the Dow continues to be in a short term and intermediate term bull trend within a primary bear trend.