Cautiousness Before the Empire State Index...

The Dow closed marginally higher by 27.81 points in a thinly traded sideways day. Apart from the fact that a few sideways days are to be expected following strong single day rallies or drops, investors were obviously cautious ahead of tomorrow's Empire state index (see Stock Market Calendar) as consensus look for a higher number than it has been in 10 months. The big deal about the Empire State Index (and the Philley Fed on Thursday) is the fact that it is a leading indicator of the ISM index and forecasts economic conditions about 6 months ahead. The Empire State Index rebounded off its low in March 2009 and have taken a bumpy recovery ride in tandem with the economic recovery outlook. Due to the economic crisis, the Empire State Index has already been negative for the past 14 months.

On the bright side, short term bullish momentum continue to rise despite the Dow being stopped short once again at its 200 days moving average. A breakout would spell the end of this intermediate technical pullback and confirm the bullish reversal scenario. For now, the Dow remains in short term neutral trend, intermediate bull trend and primary bear trend.