Cautiousness Ahead of ISM Index

The Dow continued sideways today dropping 47 points ahead of tomorrow's ISM index.

Fundamentals
Market opened strongly into the better than expected GDP, Jobless Claims and Chicago PMI but was soon overwhelmed by profit taking ahead of tomorrow's ISM index. What cheered investors most is the huge surprise on the Chicago PMI which seems to point towards a positive surprise in tomorrow's ISM index (see Stock Market Calendar). Yes, looking at the recent trend of economic data, we seem to be in a renewed cycle of better than expected numbers and this is certainly what the market needs to make new highs.

Technicals
Indeed, tomorrow's ISM index may be the catalyst needed for the market to continue its bullish climb. So far, the Dow has been moving sideways and slightly downwards this week following last Friday's huge single day rally. This is completely normal and by the textbook. As long as the Dow do not go below the low of last Friday's candle, the bull trend is in no danger. So far, the sideways movement have taken the Dow completely off short term overbought condition and it is now in an excellent position to make another climb. But of course, tomorrow's ISM index could still change things if investors do not see the economic numbers coming back as expected.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Optimism Despite Shaky Economic Data

The Dow gained 46 points today, taking back the losses from yesterday even though economic data remains shaky.

Fundamentals
Investors were greeted with a slew of largely negative economic data today. Lower consumer and investor confidence along with shaky sales figures took the market down early in the morning but could not contain the optimism in the market that has been building up the past few weeks. Investors took back lost grounds almost immediately following the ten o'clock release. The only spanner in the clockwork is the significant drop in bond yields (see Bond Yield Curve) signifying a move back to the safety of bonds even though it was a positive day today. This shows that investors are still cautious and are still hedging their way upwards.

Technicals
As I have mentioned yesterday (in my report sent only to subscribers of my daily report through email), the drop yesterday wasn't well supported and immediately recovered today. The US market is still largely technical right now as investors ride the breakout optimism. A few sideways days following a huge single day gain like last Friday's is normal and to be expected. There is nothing yet to suggest that the market won't be making new highs as the short term pattern still looks healthy. How about the huge hangman candlestick that was formed today? That has to be bearish right? Well, not really. Hangman candlesticks are very common on the way upwards in a healthy bull trend as well and is bearish only when there are other bearish signs to go along with it. I will state an example of a strong supporting signal that makes hangman candlesticks very bearish in my report to paid subscribers tomorrow.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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US Market Breaks Out!

The US market staged a decisive move to upside last week with the Dow gaining 2.38% and the S&P500 gaining 2.05%.

As I have mentioned last Thursday, it is extremely important for the S&P500 to rebound off its 1125 level in order to establish it as a support and consequently, new highs. We are happy to see that indeed, the S&P500 did just that and also broke out of its weekly 30MA, completing a reversal with immediate resistance level at about 1175.

With the market in all out bull trend once again, we would be monitoring the quality of the bull trend by observing if the daily 30MA holds for both the Dow and the S&P500. This week is also the first week of October with the ISM index coming up on Friday (see Stock Market Calendar). Whether or not this bullish sentiment gets carried into October strongly could depend heavily on how the ISM index turns out. Needless to say, a positive surprise would certainly point the market towards new highs.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Jobless Claims Disappoints...

The Dow pulled back significantly by 76 points today as investors sell into the worse than expected jobless claims.

Fundamentals
Jobless claims continued its above 450K trend, turning in above expectation at 465K. The worse than expected jobless claims opened the market deep in the red and even though the better than expected leading indicators attempted to push the market into the green today, investors took it all back by the end of the day closing all three major indices negative. So, is this pullback a negative?

Technicals
Like I said before, the Dow can only confirm this new bull trend if it goes sideways until it gets out of its short term overbought condition or pull back significantly in order to do so. That's right, a pullback in a healthy bull trend is like occassionally releasing the pressure on a hooked fishing line. Today's pullback along with those few sideways days this week has successfully taken the Dow and S&P500 slightly out of its short term overbought condition. In fact, the S&P500 is now testing its 1125 for support (which used to be resistance level). Once support is established, we would see new highs from this point forward.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Fed Keeps Rate Unchanged... As Expected

The Dow closed sideways today up a meager 7 points in a quiet trading session made volatile by the Fed announcement.

Fundamentals

Like all FOMC announcement days, the trading session was almost flat all way to the release. Even though the Fed did what everyone expected by keeping rates unchanged, investors still cheered the move by rallying into the news before profiting spurred largely by the short term overbought sentiment in the market took over. Investors ran back for the safety of bonds by the end of the session, depressing bond yields across the board (see Bond Yield Curve) in expectation of a short term pullback.

Technicals

It seems like its time at last for the market to take some of its short term overbought condition off so that it could move on higher later on. This can happen in two ways. One, a significant pullback testing the immediate support level and two, a few sideways days before a new high is made. At this stage, it is anyone's guess how that will work out as the Dow is known to do either of the two actions frequently and is also all used to rallying in deep overbought conditions. However, one thing is for sure at this stage and that is the market has made its choice and all dips from now on present a potential entry point until conditions change significantly.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Post Quadruple Witching Week

Quadruple witching day last Friday ended exactly the way I expected it last week, no big moves but big volume (read everything about what Quadruple Witching is). The Dow ended last Friday up marginally by only 13 points and finished the week up 1.39%.

If last week is an important week for the market to test the resistance level hanging over the S&P500, this week would be critical. The Nasdaq composite has broken out of the July highs but has barely broken out enough to be save from a significant pullback. The S&P500 continues to linger at the 1125 resistance and the Dow, even though broken the 200MA resistance, is yet to come up against the August high. All in all, with all major indices still struggling with strong resistance along with the fact that they are all overbought on the short term basis, we could see the pullback I mentioned last week before the market has the strength to stage a real breakout. Yes, with the higher low formed in late August, odds now favor a topside breakout but as trend followers, we don't make that decision, the market do and we simply wait for it to happen and ride along with it.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Quadruple Witching Friday

The Dow closed slightly higher by 22 points today due to complex covering and buying ahead of tomorrow's Quadruple Witching day.

Fundamentals
The market was completely technical driven today as it opened deep in the red on better than expected jobless claims and then rise through the day on worse than expected Philley Fed. Such turbulent trading pattern is typical ahead of tomorrow's Quadruple Witching day. Quadruple witching is when four different classes of derivative instruments expire on the same day, leading to an exceptionally high volume and volatility trading day. However, quadruple witching days are not known to be days of huge moves in the market as all the covering and selling in the market keeps prices within a tight range.

Technicals
Like I said in my analysis yesterday (which only paid subscribers would recieve in email), the S&P500 continues to have problems at its current 1125 resistance level. Even though the Dow and the Nasdaq composite both closed higher, the S&P500 closed lower by a marginal 0.04%. We should not be getting any big moves on Friday since its quadruple witching day but the worse than expected Philley fed should catch up by next week, leading to a lower week. Indeed, all major indices need that slight pullback before they have the real energy to stage a breakout.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Economic Number Recovers

The Dow traded sideways today as expected as the SP500 struggle at its August highs, closing down marginally by 17 points today.

Fundamentals
Even though sales data came in decent today, the market still opened deep in the red from short term overbought sentiment and ended the day mixed with the Nasdaq Composite higher and the S&P500 / Dow lower. The data today continues to suggest that we are in yet another cycle of better economic numbers. If tomorrow's Empire State Index (see Stock Market Calendar) turns out better, optimism could go into full swing as investors could be convinced that the previous worsening of economic numbers was just a seasonal, temporal thing.

Technicals
Like I said in my analysis yesterday (which only paid subscribers would recieve in email), we should expect the Dow to pullback and test the 10,400 area for support before it has the energy to go for the next resistance level at 10,700 points. For now, odds are favoring to upside since the Dow has made a clean breakout of the daily 200MA and did not make a new low in August. This completed a classic Intermediate reversal pattern which has once again ensured the survival of the intermediate bull trend.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Quadruple Witching Week

The Dow traded sideways along its daily 200MA and weekly 30MA whole week last week, closing slightly higher by 1.38% on a week on week basis.

I was wrong about last week becoming a negative week but the market didn't make an upside breakout either. The Dow is up against a pair of extremely strong resistance levels which cannot be easily broken without some extremely convincing evidence. This week, what we saw are rising bond yields which indicates that investors are somewhat convinced back into equities but persistently higher Put Call Ratio, which is normally a pattern during bearish trend as speculators take leveraged positions on put options.

This is going to be another turbulent week with the Empire State Index on Wednesday, retail and jobless claims reports which everyone would be watching as well as Quadruple Witching on Friday (see Stock Market Calendar).

The Dow is currently short term overbought at these strong resistance levels on declining volume and I do not see it breaking out to upside this week either. Odds still favor a pullback this week and I definitely would not be newly long here.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Dow Takes Back Some Lost Ground

The Dow recovered some loss ground from yesterday's huge ditch, ending the day up by 46 points amidst mixed economic numbers.

Fundamentals
Today's economic numbers were mainly about consumers and retail. Basically, what all the numbers said today was that consumers are still not forthcoming and there was nothing positively surprising in all of the numbers today. However, investors still bought into the ditch ahead of tomorrow's jobless claims number, speculating on a better than expected jobless claims since last week's Job report was pretty encouraging. Such extended period of uncertainty is typical of all recovery phases as the stock market moves faster than the real economy. Once the real economy catches up, the stock market would then go into a steady trend. It was the same way in the last economic crisis as well with 2004 to 2005 being the years of turbulent as the stock market moved way ahead of the real economy. After the real economy catches up after 2005, a steady bull trend begun and that is what we are experiencing right now.

Technicals
Like I said in yesterday's analysis (which only those who subscribed to my daily report received through email), it is not surprising to see the Dow take back some lost ground after a huge drop such as yesterday's. Today's trading formed an inside day which was completely engulfed by yesterday's trading range, as such, it is to be regarded as nothing more than a sideways day even though the gain was significant. The daily 200MA and weekly 30MA resistance still looks strong and with volume this low, confidence can't be high and the resistance levels are expected to hold as the Dow slowly enters a short term bought condition. As long as the daily 200MA level holds overhead, the intermediate bull trend continues to be in danger.

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

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Welcome Back from Labor Day!

Welcome back from the Labor Day long weekend!

Investors were clearly pleased ahead of the long weekend with the better than expected ISM index and slightly better than expected jobs report last week, closing the Dow upwards by 127 points week on week.

Last week's ISM index and Jobs report really broke the recent trend of worsening economic data. In fact, the ISM index also broke 3 consecutive months of dropping to end higher last week. Investors jumped back into equities from bonds on these news resulting in a surge in bond yields last week (see Bond Yield Curve). Even though ISM continue to point towards growth, investors are clearly worried about the self-sustenance of the economy and would most likely be cautious and sell into this short rally soon.

On the technical front, the Dow made a U-turn on the critical 10,000 points support, saving the intermediate bull trend for now. It is now once again up against its daily 200MA and its weekly 30MA resistance level. As such, I would expect a negative week this week, allowing the Dow to pullback a little before deciding for sure where it wants to go. Looking at the weekly chart, we can clearly see the Dow moving along the 10,300 points level since the year begun in what looks like the market back in 2004 - 2005. Indeed, all recovery phases are marked by uncertain periods such as this where the market moved too far ahead of the economy, however, once the economy catches up, a new bull trend will commence and the long term outlook still looks good.

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

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Optimism Ahead of Jobs Report

The Dow closed up by another 50 points today as investors remain optimistic ahead of tomorrow's Jobs Report.

Fundamentals
Investors were clearly encouraged by yesterday's better than expected ISM Index and are speculating on tomorrow's Jobs Report turning in a positive surprise as well (See Stock Market Calendar). This comes on the back of higher than expected jobless claims and lower than expected factory orders. The pending home sales numbers released in the afternoon could have sustained the rally but the market was already up and rising way before that. Consensus is already expecting a poorer unemployment rate and no-farm payroll in tomorrow's report as such, any positive surprise could really save the struggling intermediate bull trend.

Technical
The Dow continues slightly upwards relative to yesterday's rally today in a low volume trading day that looks more like a dead cat bounce. What was missing in today's "rally" was actually volume. The declining volume over these two positive days truly made the "rally" look suspicious. This, along with the fact that both the daily 30MA and 200MA are acting as overhead resistance and the prior completion of a head and shoulders formation made this "rally" sound more like a dead cat bounce than a true reversal.

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

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