Stock Market Analysis

Tuesday, March 29, 2011

Rally Continues Despite Disappointing Consumer Confidence

The Dow made yet another significant positive day, closing up by 81 points despite Consumer Confidence plunging.

Fundamentals
Market was ruled by optimism today as late comers to this short rally rushed in today, lifting bond yields across the board and depressing total equities put call ratio strongly in favor of call options trading. All of these happened despite Consumer Confidence making its biggest decline in more than a year. Investor's optimism is reflected also in today's State Street Investor Confidence reading rising to 98.3 from 91.8. As I mentioned earlier this week, we are expecting such pricing in this week running up to the Jobs report and ISM index on Friday, after which profit taking will likely follow resulting in a small gain week.

Technicals
Even though the market continue to trade bullishly, it is actually losing short term bullish momentum on our indicators. Indeed, the Dow would have to pullback a little to retest the daily 30MA or 50MA in order to confirm this recovery to an all out bull trend. As such, we would not be surprised to see a little pullback by the end of the week and would not take new short term bullish positions for now.

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