Stock Market Analysis

Tuesday, February 16, 2010

Empire State Index Surprises

The Dow gained a huge 169 points today as the Empire State Index beat consensus by a mile.

The Empire State Index turned in at 24.91 today, beating consensus of 18.0, leaping from last month's 15.92. In fact, the Empire State Index has been in pre-recession levels for months now and today's number merely reinforced the economic recovery scenario. So what's the big deal with the Empire State index? The Empire State Index is a survey on the manufacturing sector in New York region and has been a good leading indicator for the more important ISM Index. A good Empire State Index today does point towards better ISM index next month and of course, a good ISM index makes investors very happy.

Today's rebound is an extremely important but cautious one. Even though the rebound was strong and on good volume, there wasn't significant reflection of the same mood from the total equities put call ratio and the bond yield curve (see chart of both indicators). Yes, it seems like more sophisticated traders and investors are not really jumping in on this one probably due to the fact that the Dow is now at its daily 30MA again. If it fails at this level, it will collaspe into a longer term bear market and if it beats this level, the bull trend resumes... so its like a crossroad sophisticated traders don't want to bet on. Yes, odds still favor a topside breakout due to all the indications so far but nobody can ever predict the future in the stock market. I would still be short term bullish based on the indications and stay nimble.

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

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


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