Stock Market Analysis

Thursday, December 16, 2010

Better Economic Data Continues...

The Dow closed higher by 41 points today on better than expected Philley Fed and lower Jobless Claims.

Fundamentals
Economic data continue to turn in positively today as jobless claims dropped to 420K, housing starts making a comeback and Philley Fed beating expectations by a mile. Indeed, the trend of recovering economic data continues as the US economy continues its rocky way out of recession. In fact, the trend of better economic data is becoming hard not to notice as investors are quickly being convinced back into the equities market, exiting the bonds market strongly over the past few days. Bond yields rose strongly across the board as money moved from bonds into equities. However, much of that money is obviously still looking for a better entry point as trading volume remains lower than 30 days average over the past few days.

Technicals
The Dow continued a healthy climb in an attempt to escape the "gravitational field" of the November high resistance level. However, the volume just isn't strong enough to consider today's gains a "breakout". In fact, the Dow still closed within the trading range of the past two trading days which makes it more of a sideways day than a positive day. Tomorrow is Quadruple Witching Friday. Quadruple witching days usually result in a small sideways day typically closing within 0.35% of the previous day's close on huge volume as derivative instruments are being exercised for the underlying stocks. As such, we should not see a breakout on Friday either.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!

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