Stock Market Analysis

Thursday, February 18, 2010

Market Breaks Out!

The Dow gained 83 points today as the Philley Fed beat expectations.

What started out as a pretty bearish day in the market due to the much worse than expected jobless claims number, reversed and ended up sharply bullish as the Philley Fed released at 10am beat expectations, turning in 17.6 versus the prior number of 15.2. Like the Empire state index we covered two days ago, the Philley Fed measures manufacturing health in the Philadelphia region and is a good leading indicator for the all important ISM index. With both the Empire State Index and Philley Fed higher than expected, we can look forward to a better than expected ISM index two weeks later.

Today's rally is an extremely critical one as it established the fact that the daily 30MA isn't going to become an intermediate term bear resistance level that might push the market down into a significant down trend. The Dow now stands proudly atop that line and mostly importantly, today's move is being supported by a rise in bond yield across the board signifying the vote of confidence from bond traders as they move back into equities as well as a sharp 12 basis points dip in the total equities put call ratio, signifying the vote of "yes" through call options by options traders (see bond yield curve and put call ratio chart).

This rebound from the 10,000 points region has been a pretty sharp one, so don't be surprised to see a slight one or two days pullback. No markets go up forever at that kind of angle. In fact, I would expect a slight pullback tomorrow due to volatility as it is an options expiration Friday.

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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