Stock Market Analysis

Thursday, December 02, 2010

Dow Follows Up Strongly...

The Dow followed up on the rebound of Wednesday bolstered by better than expected Pending Home Sales data, closing up 106 points on strong volume.

Fundamentals
Investors followed up weakly on Wednesday's rebound when market opened but things started really taking off when the Pending Home Sales data turned up 10.4% stronger, indicating a strong return into the housing market, which is an important engine to economic growth. The lackluster opening today could be due to jobless claims turning in higher than expected. However, the 4 weeks average for jobless claims, which is what analysts really look at, continues to point towards a declining trend in jobless claims, which is definitely a plus point. Investors are also clearly pricing in an optimistic jobs report for tomorrow and I won't be surprised to see some profit taking even if the report was as optimistic as expected.

Technicals
The Dow gained a total of 356 points in this two days rally and as I mentioned in my newsletter to paid subscribers yesterday, this is truly the time to start taking cautious new long entries in order to ride the next leg up. However, since the Dow has made such a huge move in just two days, I won't be surprised to see a sideways day tomorrow no matter how the jobs report turns out. However, with the Dow so far from being short term overbought, I remain optimistic that we should see a positive week next week as investors digest all the economic data recieved these couple of weeks.

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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