Factory Orders Declines...
The Dow corrects slightly after yesterday's huge rally by 38 points on weaker than expected store sales and retreating factory orders.
Fundamentals
The ISM index on Monday already indicated slowing growth in the manufacturing sector and today's factory orders continue to confirm those numbers by turning in -1.2% versus estimates of -0.5% (See Stock Market Calendar). In fact, it fell right out of the consensus range of -1% to 0.1%. However, even though these numbers are retreating, it is only normal in the grander picture of things after such an explosive growth coming out of the recession. In fact, major economic indicators were way higher than pre-recession levels and the recent retreat only brings back down to more sensible levels. That is probably why we didn't see the kind of panic selling associated with poor economic numbers.
Technicals
So, did the Dow do anything significant today? Not really. Like I always said, it is normal for the Dow to go sideways or slightly in the other direction following huge single day moves. Volume is also much lower than average today which gives little strength to today's pullback. For now, the base of the up candle formed yesterday will serve as short term support. As long as it is not breached, the short term bull trend continues to be intact. The only thing that keeps technical traders from jumping in right now is the strong short term bearish divergence formed on the RSI, without which, there will be no doubt that this is the kind of reversal we saw back in February.
For now, the Dow remains in a short term bull trend, intermediate neutral trend within a primary bull trend.
Fundamentals
The ISM index on Monday already indicated slowing growth in the manufacturing sector and today's factory orders continue to confirm those numbers by turning in -1.2% versus estimates of -0.5% (See Stock Market Calendar). In fact, it fell right out of the consensus range of -1% to 0.1%. However, even though these numbers are retreating, it is only normal in the grander picture of things after such an explosive growth coming out of the recession. In fact, major economic indicators were way higher than pre-recession levels and the recent retreat only brings back down to more sensible levels. That is probably why we didn't see the kind of panic selling associated with poor economic numbers.
Technicals
So, did the Dow do anything significant today? Not really. Like I always said, it is normal for the Dow to go sideways or slightly in the other direction following huge single day moves. Volume is also much lower than average today which gives little strength to today's pullback. For now, the base of the up candle formed yesterday will serve as short term support. As long as it is not breached, the short term bull trend continues to be intact. The only thing that keeps technical traders from jumping in right now is the strong short term bearish divergence formed on the RSI, without which, there will be no doubt that this is the kind of reversal we saw back in February.
For now, the Dow remains in a short term bull trend, intermediate neutral trend within a primary bull trend.
Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!
posted by Jason Ng at 8:19 PM
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