Stock Market Analysis

Wednesday, January 19, 2011

Economic Data Remains Soft...

The Dow closed marginally lower by 12 points as sales data turned in softer as expected.

Fundamentals
Sales data today turned in softer as expected due to post holiday season and heavy weather. Both the S&P500 and the NASDAQ composite ended the day significantly lower, closing down by 1.01% and 1.46% respectively. Investors were clearly concerned about volatility surrounding tomorrow's major economic releases and Friday's options expiration. Analyst estimates for tomorrow's Leading Indicators and Philley Fed are both for the downside which causes some concern about how the market will react. Yes, we are still in a short term period of shaky economic data which is totally normal in a recovery market, coinciding with the market's technical need for a breather before more upside can be expected.

Technicals
Today's retreat is an extremely healthy one which could actually help the market go further upwards if tomorrow's economic data surprises to upside. However, even if it doesn't, a couple of days more retreat would actually put the market into a far better position for future gains. As we go into the final 7 trading days of the month of January, would historical odds drive the market lower from here onwards to close negative for the month of January once again? So far its hard to tell but odds continue to favor a short term pullback perhaps down to the 30MA level both for the Dow and the S&P500.

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