Market Surge on GDP but No Breakout...
The Dow made an impressive run for the 8500 resistance level on a favorable revision of Q1 GDP last Friday, surging by 96 points. However, the Dow once again stopped short of the 8500 resistance level without a breakout. Good news is that short term bullish momentum on my indicators are rising once again, which means that the 3 weeks of short term neutral trend could have exhausted the bears enough for the bulls to stage a breakout. However, speculations aside, we need to see the breakout actually happen before sounding the trumpets.
So far, the economic data does support a recovery outlook. More and more investors are now convinced that the way ahead is especially optimistic. In fact, stock markets in emerging market nations such as Russia, India and China has moved for ahead of the US market. In fact, I am more and more convinced that we are witnessing a reversal here even before the Dow do that all important pullback that will identify this intermediate rally as either a secondary wave up in a primary Bear market or a real bullish reversal.
This is going to be a heavy weight week(see Stock Market Calendar) with the Jobs Report on Friday and the ISM index on Monday. Yes, we get these 2 important numbers on the first week of every month. Will we see a reversal in the unemployment rate to set the unemployment rate reversal rally into action? Consensus is for unemployment rate to rise above 9%, which is totally possible with big giant companies still laying people off. Has the stock market moved too early then? Not really. The stock market is a discounting mechanism, which means that it is pricing in future value instead of what is happening right now or what has happened. The unemployment rate could really be higher this time round but what investors are pricing in right now is the recovery that will follow.
The Dow continues to be in a primary bear trend, intermediate bull trend and short term neutral trend.
So far, the economic data does support a recovery outlook. More and more investors are now convinced that the way ahead is especially optimistic. In fact, stock markets in emerging market nations such as Russia, India and China has moved for ahead of the US market. In fact, I am more and more convinced that we are witnessing a reversal here even before the Dow do that all important pullback that will identify this intermediate rally as either a secondary wave up in a primary Bear market or a real bullish reversal.
This is going to be a heavy weight week(see Stock Market Calendar) with the Jobs Report on Friday and the ISM index on Monday. Yes, we get these 2 important numbers on the first week of every month. Will we see a reversal in the unemployment rate to set the unemployment rate reversal rally into action? Consensus is for unemployment rate to rise above 9%, which is totally possible with big giant companies still laying people off. Has the stock market moved too early then? Not really. The stock market is a discounting mechanism, which means that it is pricing in future value instead of what is happening right now or what has happened. The unemployment rate could really be higher this time round but what investors are pricing in right now is the recovery that will follow.
The Dow continues to be in a primary bear trend, intermediate bull trend and short term neutral trend.
posted by Jason Ng at 4:21 PM
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