Chicago PMI Beats Expectations...

The Dow gained marginally by 35 points today as the Chicago PMI beat expectations.

The Chicago PMI (Purchasing Manager's Index) turned in better than expected today at 56.1 vs consensus of 53. Readings above 50 suggest an expanding economy while readings below 50 suggest a contracting economy. What today's 56.1 tells us is that the US economy has stepped out of recession and is expanding at an accelerating pace. Tomorrow's ISM index would be the real heavyweight indicator of how the economy is doing. So far, the ISM index has recovered to almost pre-recession levels. Investors should be prepared for some volatility.

So far this month, the Dow has been trading largely sideways. I speculated that it will retreat back to its 30MA before moving higher but it seems like it prefers to wait for its 30MA to catch up on it instead. Still, we need to see the Dow break out of its current range before any short term trading is possible.

For now, the Dow has turned short term neutral trend within an intermediate and long term bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Heavy Weight Week Again...

Welcome back! Hope you had a great Thanksgiving weekend!

One reason why professionals like myself are reluctant to put on new positions prior to long weekends is because anything can happen over so many days. That was what happened this time time with the Dubai credit crisis. Dubai's sovereign fund requested for a suspension of debts just a few hours after issuing their new bonds in a move that tells the whole world that they have overspent like a lady in a Prada shop. Stock markets drop all over the world in fear of a new "financial crisis" arising out of this event. The Dow also dropped by 154 points in last Friday's half day trading.

Seriously, the Dubai incident isn't a big deal for two reasons; Firstly, not every country in the world are invested in Dubai in a big way. Secondly, its a debt suspension, not yet a debt default. In fact, the Dow is going to retreat down to retest the 10,000 points level again as I have mentioned before and it might as well have been on the back of an event such as this one. The Dow has been secretly wearing off most of its short term overbought condition last week over the weak trading volume which leads me to think that a retreat may be only down to the 30 MA instead of all the way down to the 10,000 level. Either way, the direction is still upwards for now on the intermediate and long term basis and I don't see anything that threatens it.

This is the first week of December and yes, a heavyweight week in terms of economic numbers (see Stock Market Calendar). Once again, we will get the ISM index and the Jobs Report this week which will certainly have much more impact than the Dubai incident.

For now, the Dow remains in a all out bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Happy ThanksGiving!

Its been a light trading week this week so far and I hadn't been writing as I am holidaying in Japan for this Thanksgiving. Will be back writing again next week.

HAPPY THANKSGIVING!

Suspicious Start for the Week

What a great start to thanksgiving week with the Dow gaining 132 points on encouraging Durable goods order and Jobless Claims.

The US Market launched to a great start as Durable goods orders and jobless claims beat expectations (see Stock Market Calendar), fuelling the recovery scenario. This extreme optimism was echoed by the total equities Put Call Ratio ditching by 25 points today from almost par to extreme call options trading. However, what was lacking today was volume. Volume was light as expected of the thanksgiving week and such aggressive buying on both the stocks and options front tells me that perhaps some institutions are trying to create a rush in this thanksgiving week. Whether retail investors and traders take the bait is still left to be answered but there is no doubt that today's rally once again pushed the Dow back up to that uncomfortable, shaky, peak. From the trading patterns, I have no doubt that investors and institutions are still trying to take profit prior to the holiday but wants to do so in style.

From the lack of volume going into today's rally and sudden surge in call options trading, I have no doubt that the tide will turn and the 10,000 points level retested.

For now, the Dow remains in a all out bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Thanksgiving Week!

Welcome to Thanksgiving week!

Yes, its going to be a holiday shortened week this week with Thanksgiving on Thursday and a half day market on Friday (see Stock Market Calendar). Trading volume is expected to be light this week as investors and traders go on their seasonal holiday. Expect to see some profit taking ahead of Thanksgiving as traders traditionally take some profit to finance their holidays. Santa Claus rally? Doesn't exist anymore.

For now, the Dow remains in an all out bull trend.

Dow Starts Retreat

As expected, the Dow started its retreat, closing down 93 points at 10332 points despite optimistic forward looking data.

Both leading indicators and Philley Fed data continue to support a recovering market going forward (see Stock Market Calendar). In fact, Philley Fed outlook has not been higher even during the pre-crisis years! However, as a technically driven toppy market, traders sold off into the news, setting the Dow up for a revisit to the 10,000 points region like I have been talking about for the past few days. Yes, this is a healthy and necessary retreat in order to set the market up for higher highs.

For now, the Dow remains in a all out bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Options Expiration Week Ahead

The Dow ended the week up a total of 247 points or 2.46% last week as investors take the Dow out of the 10,000 points blackhole.

But is it really safe now? On a long term basis, yes. We have announced a primary bull trend months ago and if you have followed on that, you would have made significant gains by now. How about the short term? Well, last week's rally left the Dow once again in short term overbought condition and short term bearish momentum is once again rising. I would expect a revisit to the 10,000 points again this week so that the Dow can get out of overbought condition again and also establish the 10,000 points as a new short term support level. Once that is done, the bull trend can continue.

This is options expiration week and leading indicators week (see Stock Market Calendar), so do expect a fair bit of volatility.

For now, the Dow remains in a all out bull trend.

Retreat Begins...

The Dow ended its 6 days rally with a 93 points retreat today, forming a short term evening star signal. Yes, it seems like the retreat that I have been expecting is coming just that few days earlier than expected. Like I mentioned yesterday, this retreat is inevitable and healthy for the market and whether the 10,000 points area becomes the next short term support level is critical for whether the market moves higher.

Today's ditch came on the back of a better than expected jobless claims number (see Stock Market Calendar), further reinforcing the fact that it is a technically driven market right now. Markets become extremely technical driven when its bottomy or toppy. This is definitely an intermediate term toppy market where a lot of uncertainty and profit taking takes place.

For now, the Dow remains in a all out bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Running Out of Short-term Steam

Another largely sideways day for the Dow, closing up by 44 points, making it the 6th consecutive positive day. Not unusual for the market to trade largely sideways for a few days following huge single day rallies or ditches. Even though volume was seriously lacking today, today's market action remained largely bullish as the Dow made new highs for the year. The Dow also entered short term overbought condition today and with investors obviously being cautious, I would expect the Dow to actually go sideways for a couple of days more before actually turning downwards and retest the 10,000 points level again. This retest is extremely important in order to establish it as the new short term support level. That will also help ease the Dow out of its short term overbought condition for new highs.

For now, the Dow remains in a all out bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Dow Breaks Out For REAL!

The Dow broke out of the 10,000 points resistance zone as expected with a huge 203 points rally, closing the day at 10226 points.

Yes, this is the resolute, clean, breakout that makes a breakout. Volume was also encouraging and rally was broadbased. Not only did the Dow breakout of the 10,000 points zone cleanly, it also defeated last month's high all in one day (the 2 criteria I mentioned yesterday). This is an extremely important breakout that will promise more upside to come. The market broke out as G20 nations committed to continued support for world economy until recovery is certain. Obviously many people still think the recovery isn't certain. Well, we always need late comers to the party in order to throw leftovers to. We are certainly not one of them.

The Dow is still way off short term overbought and MACD has just crossed into positive territory, this gives plenty of room to upside before the Dow retreats and retest the 10,000 points again as I have mentioned yesterday. I expect this to be a strong positive week with some consolidation next week. Enjoy the bulls!



For now, the Dow remains in a all out bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Quiet Week Ahead...

Unemployment rate reported in higher than expected last Friday at 10.2%, beating consensus of 9.9%. In fact, that was the highest unemployment rate since 1983. However, that didn't stop investors from keeping the Dow above water on Friday, closing the week up by 310 points ( 3.20%).

Last week's market action has once again been largely technically driven with investors pouring in at the 50MA line, driving the Dow onto the 10,000 points level again. Other than a lack of volume, last week's market action has been extremely encouraging with the Dow still way off short term overbought level, giving it plenty of room to move to upside. So, is the 10,000 points over? It will if the Dow beats last month's high and then retreat to rebound off the 10,000 points level again. That will set the 10,000 points level as a support level and leave the Dow with plenty of upside. This is a quiet week ahead with no major releases (see Stock Market Calendar). Last week's numbers paint a clear picture; the economy is recovering but it takes time for firms to start hiring again, which still leaves plenty of good news for the future to drive the Dow higher. I actually think it is a good thing.

For now, the Dow remains in a short term bull trend within an intermediate and primary bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Profit Takers Still In-Charge

The Dow started the month optimistically, closing up by 76 points on better than expected ISM index.

The strong follow up that we are hoping to see did not happen,instead, all we saw was that profit takers were still very much in control of the situation, beating down the market right after today's FOMC Announcement. Yes, profit takers were merciless in securing positions in cash even though the Fed did everything right, destroying what is to be a strong follow up day. Yes, if the market ended as strong as it was before the Fed announcement, investors might have enough confidence to start coming back in again. That didn't happen. This puts the Dow in an extremely perilous position jammed sideways between its 30 and 50MA. The good thing about today's market action is that it left the Dow with a reversal of its short term bearish momentum so its pretty much neutral now. There are obviously bulls in the market but they are just not as shrewd as the profit takers.

For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

Great Start To The Month

The Dow started the month optimistically, closing up by 76 points on better than expected ISM index.

The US economy continues to present optimistic report cards as the ISM index turned in far better than expected. ISM index released this morning turned in 55.7 versus last month's 52.6 and beating consensus of 53. In fact, this reading is now way higher than any of the ISM index readings back in the bullish 2007! Hold on, what is this ISM index anyway?

The ISM Index is the Institute of Supply Management Manufacturing Index. It is also known as the ISM manufacturing index with its sister ISM services index sometime later this week. The index is compiled from a survey of 300 manufacturing firms and is the first economic indicator released every month. Its correlation with real GDP is what made it a heavyweight economic indicator watched even by the Fed. In fact, an ISM index reading of 50 has been consistent with a real GDP growth of about 2.5% with every full point adding another 0.3%. Generally, a reading above 50 indicates economic expansion while a reading below 50 indicates economic contraction. That made today's 55.7 an indication of economic expansion without a shadow of a doubt.

Traders and investors obviously welcomed the great news, pushing the market up in the morning before once again succumbing to profit taking pressure in the afternoon. Even though there was obviously still much profit taking in the market, the Dow did once again bounce off its 50MA, strengthening it as its intermediate term support level. But lets not rejoice too early. We do need to see a strong follow up tomorrow before we can lean the edge towards the bulls. For now, sentiments remains more bearish than bullish.

For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

New Month & A Heavyweight Week Ahead

Welcome to a new month! Let's hope the new month brings a new breakout and new profits for all of us!

What was shaping up to be a rebound last Friday turned out as a dismal week with the Dow down 2.6% on the week, ending right on top of its 50MA line again.

Yes, the only explanation so far is the widespread consolidation sentiment near the 10,000 points level as the most important data last Friday, the Chicago PMI turned in way better than expected and above the 50 line at last, indicating economic expansion. Yes, traders have been taking profit whole week last week, bringing the Dow out of short term overbought and back down into short term oversold condition again. A look at the weekly charts doesn't make this retreat any more threatening than the many pullbacks that we have got along this rally so far. This means that the integrity of this rally is still intact for now. We need to see a rebound off the 50MA this week in order to preserve this rally. This is going to be a heavy weight week with the ISM index on Monday, FOMC Announcement on Wednesday and Jobs report on Friday (see Stock Market Calendar) and those numbers would certainly be the key to providing that much needed boost back to the 10,000 line.

For now, the Dow turns short term neutral trend within an intermediate and primary bull trend.

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!