Stock Market Analysis

Tuesday, February 01, 2011

ISM Index Makes 7 Year High!

The Dow closed higher by 148 points today as optimism returns to the market on better than expected ISM index.

ISM index beat expectations today, climbing to a 7 year high, supporting the economic recovery scenario. Investors also reallocated from the safety of bonds back into equities on the news, driving the market higher throughout the day. Options traders also moved back into call options today, inclining the total equities put call ratio towards call options trading.

Today's follow up completed negated the effects of last Friday's single day 166 points drop, confirming it as nothing more than just the bear trap I mentioned to paid subscribers yesterday. With the Dow at its 12,000 short term resistance level along with such strong two days move, it would be normal for the market to go into a few sideways days as traders take some short term profit off the table. In fact, the market might just go sideways until Friday's Jobs report release.

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