Dow Pullback Despite Great Empire State Index

The Dow made its biggest single day retreat since this rally begun, closing down 186 points despite encouraging Empire State Index.

Yes, this it technical pullback at its best. A big pullback despite an economic number surprise that should encourage a breakout. Yes, short term technical movements cannot be simply explained by economic numbers especially in overbought or oversold conditions. This is definitely the technical pullback that I have been talking about for days. The good news is, the short term support marked by its 30 days moving average is slowly catching up as well, setting the short term bottom at about 9000 points. The 30 days moving average has been a strong short term support for the Dow in terms of intermediate trend and as long as this line holds, this rally has more to go. Investors are also reallocating into the high bond yields this month bring bond yields steadily lower all month long (see Bond Yields). With bond yields again at reasonable levels and 30 days moving average line drawing nearer, it does seem like it is going to hold up afterall with the eventual reallocation back into stocks.

For now, the Dow is in short term neutral trend, intermediate term bull trend and primary bull trend.