Stock Market Analysis

Tuesday, September 28, 2010

Optimism Despite Shaky Economic Data

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

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.

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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