Stock Market Analysis

Sunday, February 06, 2011

Economic Recovery Continues...

The Dow not only took back all the lost ground of 28 Jan (single day bear trap that freaked some beginners out) last week but also made a new high for this recovery, gaining 2.27% week on week.

US market got a boost last week on much better than expected economic data. Of note are the better than expected ISM Index (60.8 versus 57.5 consensus) and unemployment rate (9% versus 9.5% consensus). These numbers continue to support the economic recovery scenario and of course, higher stock prices. Investors also rushed back into equities from the safety of bonds last Friday, leading to a surge in bond yields across the board. In fact, the Dow is back up to early 2008 level and would certainly be back up to new highs with continued economic recovery in the next year or so. It is going to be a quiet week ahead with no major economic release, as all second week of the months are, and a time for late comers to partcipate in last week's rally.

With a quiet week and high bond yields, we can expect a slower week ahead as some investors get encouraged back into bonds by the high bond yields.

On the technical front, there is currently no strong evidence to suggest that this bull run is going to end in the short term, especially after the single day breather of 28 Jan. As the saying goes, the Trend is Our Friend. Let's run with it.
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