Stock Market Analysis

Tuesday, August 31, 2010

Cautiousness Ahead of Heavyweight Releases

The Dow ended in a relatively sideways day up marginally by 5 points amidst mixed economic data released today.

Fundamentals
Investors are bombarded by pretty mixed economic data today. On the one hand, the retail numbers and consumer confidence showed better than expected performance while investors confidence and Chicago PMI continued to move lower (see Stock Market Calendar). In fact, the Chicago PMI, which is considered one of the leading indicators for the ISM index, turned in its lowest level since Nov 2009 even though the number beat consensus. Investors are also clearly cautious ahead of the other heavyweight releases this week; Tomorrow's ISM index and Friday's Jobs report. Bond yields also dipped across the board as investors reallocate into the safety of bonds ahead of the uncertainty. All in all, the theme of the market now is "UNCERTAINTY". There are analysts screaming for the Dow reaching 5000 within the next two years and plenty others with a much more optimistic outlook. Rarely is the market this divided.

Technical
So, what does these all mean on the technical front? The Dow continues to move sideways along its 10,000 points support level as the bulls put up a last ditch effort to keep the intermediate bull trend alive. In fact, these sideways movement has also helped bring the Dow out of its short term oversold condition which opens up the room to downside. This along with the trend of worsening economic data, the odds sure favors a downside breakout. This week's major releases could be the deciding factor on whether the 10,000 points support holds or gets broken to downside.

For now, the Dow remains a short term bear trend, intermediate bull trend within a primary bull trend.




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

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