Dow Sideways as Leading Indicators Disappoint...
The Dow opened deep in the red and closed down by 41 points as Leading Indicators failed to beat consensus.
Fundamentals
Leading indicators is a widely watched economic indicator consisting of ten economic indicators that typically lead economic activities. It provides an indication on the expected economic activity about six months down the road, hence its importance. Indeed, the stock market always looks forward, discounting to present value all future expectations. The mistake too many investors make is to take the stock market as a reflection of current economic activities and then scratch their head why the stock market head in so different a direction to present conditions most of the time. Even though Leading indicators are lower than expected, such volatility is to be expected as it has gained steadily over the past few months, supporting the recovery scenario. Indeed, nothing takes a straight path up or down, even the leading indicators. In fact, the sharp recovery off the intraday low today shows that sensible buyers are still in the market. Investors are also expected to be cautious prior to this Wednesday's FOMC Announcement (see Stock Market Calendar) as they traditionally do. Not surprising to see another sideways day tomorrow.
Technicals
The Dow did yet another sideways day today as it continue to digest away its short term overbought sentiment. As I have always said, a few sideways days following each big up day is to be expected. This is the third sideways day since the Dow staged a breakout on 16 Sep, so it is nothing unusual yet. In fact, with the Dow still slightly in the short term overbought condition, it could very well retest the 9600 level before moving any higher. Yes, there is no doubt the way ahead is upwards.
For now, the Dow remains in all out bull trend.
Learn how to Read Options Symbols for free.
Fundamentals
Leading indicators is a widely watched economic indicator consisting of ten economic indicators that typically lead economic activities. It provides an indication on the expected economic activity about six months down the road, hence its importance. Indeed, the stock market always looks forward, discounting to present value all future expectations. The mistake too many investors make is to take the stock market as a reflection of current economic activities and then scratch their head why the stock market head in so different a direction to present conditions most of the time. Even though Leading indicators are lower than expected, such volatility is to be expected as it has gained steadily over the past few months, supporting the recovery scenario. Indeed, nothing takes a straight path up or down, even the leading indicators. In fact, the sharp recovery off the intraday low today shows that sensible buyers are still in the market. Investors are also expected to be cautious prior to this Wednesday's FOMC Announcement (see Stock Market Calendar) as they traditionally do. Not surprising to see another sideways day tomorrow.
Technicals
The Dow did yet another sideways day today as it continue to digest away its short term overbought sentiment. As I have always said, a few sideways days following each big up day is to be expected. This is the third sideways day since the Dow staged a breakout on 16 Sep, so it is nothing unusual yet. In fact, with the Dow still slightly in the short term overbought condition, it could very well retest the 9600 level before moving any higher. Yes, there is no doubt the way ahead is upwards.
For now, the Dow remains in all out bull trend.
Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!
Learn how to Read Options Symbols for free.
posted by Jason Ng at 6:24 PM
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