Stock Market Analysis

Monday, September 06, 2010

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.

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


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