ISM Continues To Recover...
The Dow gained marginally by 57 points as the ISM index missed estimated marginally at 44.8 vs 45.
The ISM index was again better than it was last month and continued to reinforce the economic recovery scenario. However, that did not stop investors from being cautious ahead of tomorrow's unemployment rate number and the long weekend that loomed ahead (see Stock Market Calendar). Trading volume remained low whole week long as nobody wants to be the hero. There are a lot of money on the sidelines, yes, but is worth nothing if nobody takes action. Unemployment rate is expected to hit a high of 9.6% this time round and investors clearly aren't willing to risk anything on that. With so much fear and resistance in the market, it is hard to see how the Dow can stage an upside breakout.
The Dow reversed its short term down trend into a short term neutral trend today as it continued to crawl just beneath its 30 days moving average. That line has been the support/resistance line for this intermediate term rally so far and it's still doing a good job of preventing the Dow from staging a breakout. In fact, this is a rare period of time where the long term and short term moving averages are cramped up almost all at one spot, suggesting that this is a point of decision. This is the point where the Dow must make a decision for the next intermediate leg. Be it up or down. From the market action so far these couple of weeks, downwards seems a lot more logical than upwards. Yes, we do need this intermediate pullback. If it does not go full length this time round, it will the next time round and stronger then. This intermediate pullback is necessary to determine if we are in a real bullish reversal or simply a continuation of the primary bear trend. Yes, history teaches us that bear markets can go on longer than this.
The ISM index was again better than it was last month and continued to reinforce the economic recovery scenario. However, that did not stop investors from being cautious ahead of tomorrow's unemployment rate number and the long weekend that loomed ahead (see Stock Market Calendar). Trading volume remained low whole week long as nobody wants to be the hero. There are a lot of money on the sidelines, yes, but is worth nothing if nobody takes action. Unemployment rate is expected to hit a high of 9.6% this time round and investors clearly aren't willing to risk anything on that. With so much fear and resistance in the market, it is hard to see how the Dow can stage an upside breakout.
The Dow reversed its short term down trend into a short term neutral trend today as it continued to crawl just beneath its 30 days moving average. That line has been the support/resistance line for this intermediate term rally so far and it's still doing a good job of preventing the Dow from staging a breakout. In fact, this is a rare period of time where the long term and short term moving averages are cramped up almost all at one spot, suggesting that this is a point of decision. This is the point where the Dow must make a decision for the next intermediate leg. Be it up or down. From the market action so far these couple of weeks, downwards seems a lot more logical than upwards. Yes, we do need this intermediate pullback. If it does not go full length this time round, it will the next time round and stronger then. This intermediate pullback is necessary to determine if we are in a real bullish reversal or simply a continuation of the primary bear trend. Yes, history teaches us that bear markets can go on longer than this.
posted by Jason Ng at 6:10 PM
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