Dow Drops in Response to China Drop
Fundamental Analysis
Yes, the first new week of each month are heavyweight weeks as the most influential of economic numbers such as the ISM index and the Jobs Report are released (see Stock Market Calendar). The Chicago PMI released today beat consensus, turning in at 50, suggesting the bottom of the recession for the region for the month of July. A number above 50 suggests expanding business activity while a number below 50 suggests contraction in Chicago. The Chicago PMI has been below 50 since this economic crisis begun in 2008 which is what makes this return to 50 such an important event. We could see a boost to the market if the ISM index beats expectation of 50.5 tomorrow.
Technical Analysis
Today is really just another sideways day, the 6th sideways day, for the day. Such sideways movement following huge one day gains are useful for digesting some of the short term overbought sentiment created by those huge one day rallies. In this case, it is the rally of 21 Aug that it is digesting. In a weak bull trend like this one, the Dow cannot be expected to trade very far above from its 30 days moving average and periodic breach of the 30 and 50 days moving average into a short term pullback should also be expected. Such is the characteristic of weak bull trends.
For now, the Dow remains in all out bull trend.
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