Dow Sideways Despites Great Numbers
The Dow gained a marginal 4.23 points (0.04%) today for a 7th straight day as another slew of great economic numbers fought against a weak and unwilling market.
Fundamental Analysis
Durable goods orders, which is a forward looking indicator of future economic performance based on the amount of factory hard goods ordered the past month, beat consensus of 2.5% with a surprising 4.9% and beating last month's -2.5%. This number definitely points towards future economic growth as it is also the highest level of durable goods order since this crisis begun! However, investors were unmoved by this great number as it has already been priced into the market in the rally a few trading days ago. However, investors were taken by a surprisingly strong New Home Sales number that beat the consensus of 390K with 433K. Yes, the housing market has been the thorn in the flesh of all investors even before this market crisis begun and that thorn seems to be slowly getting pulled out at last. A healthy housing market is necessary ingredient to a healthy economy. Now that most of the unhealthy practises and loans are out of the market, the housing market can now be on the warpath to recovery once again, attracting real investors with real money. Without today's great new home sales number, the market could very well end up in the red. Investors will look forward to tomorrow's GDP revision for some more optimism (see Stock Market Calendar)
Technical Analysis
Technical analysis has a way of cutting through the bullsh*t and getting to the point. So, what really happened today? NOTHING. Like I said before, a few days of sideways or slightly negative days following huge one day surges are common technical behaviors caused by profit taking after strong single day rallies. Especially in a weak bull trend like this one which is made up of a few big moves intersected by lots of small or negative moves. Clearly the Dow is now in a volatile bull trend or what some calls a weak bull trend where investors continue to be cautious of positive news and take quick profits. This is a textbook behavior of investors during market reversal points as all finance professionals have learnt in school. So classic. Such sideways or negative days actually make for better entry points for those who has missed the show so far.
For now, the Dow is in all out bull trend.
Fundamental Analysis
Durable goods orders, which is a forward looking indicator of future economic performance based on the amount of factory hard goods ordered the past month, beat consensus of 2.5% with a surprising 4.9% and beating last month's -2.5%. This number definitely points towards future economic growth as it is also the highest level of durable goods order since this crisis begun! However, investors were unmoved by this great number as it has already been priced into the market in the rally a few trading days ago. However, investors were taken by a surprisingly strong New Home Sales number that beat the consensus of 390K with 433K. Yes, the housing market has been the thorn in the flesh of all investors even before this market crisis begun and that thorn seems to be slowly getting pulled out at last. A healthy housing market is necessary ingredient to a healthy economy. Now that most of the unhealthy practises and loans are out of the market, the housing market can now be on the warpath to recovery once again, attracting real investors with real money. Without today's great new home sales number, the market could very well end up in the red. Investors will look forward to tomorrow's GDP revision for some more optimism (see Stock Market Calendar)
Technical Analysis
Technical analysis has a way of cutting through the bullsh*t and getting to the point. So, what really happened today? NOTHING. Like I said before, a few days of sideways or slightly negative days following huge one day surges are common technical behaviors caused by profit taking after strong single day rallies. Especially in a weak bull trend like this one which is made up of a few big moves intersected by lots of small or negative moves. Clearly the Dow is now in a volatile bull trend or what some calls a weak bull trend where investors continue to be cautious of positive news and take quick profits. This is a textbook behavior of investors during market reversal points as all finance professionals have learnt in school. So classic. Such sideways or negative days actually make for better entry points for those who has missed the show so far.
For now, the Dow is in all out bull trend.
posted by Jason Ng at 8:49 PM
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