Bulls Rule Despite Worse Economic Data

The Dow rallied another 72 points today despite worsening economic data.

Fundamentals
First quarter GDP and jobless claims both turn out worse than consensus today as expected. Yes, as I have mentioned before, the US market is going through yet another period of short term economic data volatility. Economic data don't usually go all the way straight up or down. Like stocks, economic data also go upwards or downwards interspersed with short term periods of volatility and this is one of them. Q1GDP eased to 1.8% vs consensus of 2% and jobless claims made a sharp increase to 429K vs consensus of 390K. In fact, the 4 weeks moving average for jobless claims has been moving upwards these few weeks, scaring some investors back into bonds. Bond yields dropped across the board today as more investors moved back into the safety of bonds in the face of uncertain economic data.

Technicals
However, traders seem undaunted by the economic data and continued to push the market into new highs following the successful rebound off the 30/50MA line. Today's rally also pushed the market into a short term overbought condition and the volatility I spoke of may set in next week. Yes, we should see a slow sideways volatile week next week following such a strong weekly gain on uncertain economic data.

For now, the Dow remains in short term bull trend, intermediate term bull trend within a primary bull trend.
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Watch on Deck, Bulls Have the Ship!

The Dow rallied 115 points today as the market celebrates a slew of better than expected economic data.

Fundamentals
Market received a much needed boost today from better than expected Easter retail sales and Consumer Confidence. Both Store sales and Redbook reflects much better sales over the Easter period before market opened resulting in a strong opening which saw some profit taking. However, the bulls really took charge after the much better than expected Consumer Confidence data was released at 10am. Indeed, in an economy driven by consumers, these numbers really drive home a message; that consumers are still willing and able to spend. Just the message investors need to jump in on. However, the surge in sales is really just a seasonal one and with the current short term trend of deterioration in economic data, we might see some volatility and profit taking over the next few days as other economic data are released.

Technicals
A strong breakout candle with strong volume was created today, the kind that is needed to jump start a new leg for a new high. However, I would expect the market to move sideways for a few days following such a strong breakout. All in all, it is clear that the bulls are in charge and the market has returned to a general all out bull trend. Lets enjoy the ride!

For now, the Dow remains in short term bull trend, intermediate term bull trend within a primary bull trend.
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Had a Happy Easter Weekend?

Welcome back and I hope all of you had a Blessed Easter weekend!

The market had a great run last week primarily bolstered by a general sense of optimism ahead of the Easter weekend as well as technical support around the 30/50MA level.

However, the fundamentals does appear to be shaky again as last Thursday's Jobless claims and Philley Fed both turned up worse than expected with Leading Indicators only marginally better. This could lead to a slower week this week as investors digest these mixed data along with the Fed's announcement on Wednesday.

On the technical front, the Dow is still a distance from being short term overbought and short term bullish momentum continue to rise. Market continues to be upside inclined for now even though it would be more reasonable to expect a few sideways days from here after such explosive moves. Its time to spot good entry points and profit from this new leg up.
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Rebound Completed! Bulls Away!

US market made a surprisingly strong rally as successful retest of short term support along with strong earnings encouraged an avalanche of traders pushing the Dow up by 186 points.

Fundamentals
Many factors came together to make today's extremely strong rally possible; Fantastic earnings on the tech front, better existing home sales, successful retest of short term support as well as a generally happy mood ahead of the Easter weekend. Earnings on the tech front has been extremely strong, leading the way ahead today. Of note were the much better than expected earnings of INTEL and APPLE. We shall have the major economic releases for the week tomorrow ahead of the Easter holiday ; Jobless Claims, Philley Fed and Leading Indicators. All of which shed some light on how the ISM index and Jobs report would turn out in 2 week's time. Another bullish sign today is investors returning to the equities market at last today, raising bond yields across the board. These investors could take over the support from the traders over the next few days until the herd take the market all the way up.

Technicals
As I mentioned to paid subscribers yesterday, we need a successful followup today in order to confirm the rebound and that is exactly what we got today. The Dow completed the same rebound pattern we saw back in December 2010 and all technical indications suggest that the bull is back in strength. If past pattern repeats itself, we should see another few good months before another significant pullback like the one we just had occurs.

For now, the Dow turns a short term bull trend, intermediate bull trend and primary bull trend.
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US DOWNGRADED!

US market took a surprising hit today as US credit outlook was downgraded from "Stable" to "Negative" on the long term by S&P. The Dow closed 140 points lower.

Fundamentals
In a surprising move citing "...material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013...this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer "AAA" sovereigns.", Standard & Poors cuts US credit outlook from "Stable" to "Negative". This caused investors to rush back into the safety of bonds, depressing bond yields across the board as the Dow went as low as 12,093 intraday. However, technical bargain hunting is clearly still strong in the market as traders swooped in and took the market much higher than its intraday low by the end of the day. Yes, in a market looking for strength amidst global turmoil, S&P's rating cut certainly does nothing to help.

Technicals
Even though today's beat down was surprising and painful, there is one interesting observation; that the 30/50MA support level has been tested and proven strong. Traders swooped in as the Dow went below its short term 30/50MA support level and took it all the way back up to slightly above the line revealing significant support at that level and that the Dow may not be ready to give up without a fight. In fact, should the Dow make a good positive day tomorrow, it would complete the "retest and rebound" scenario I mentioned weeks ago which will allow the market to move on to new highs healthily.

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

The Dow continued to move sideways today, closing marginally higher by 14 points despite disappointing jobless claims.

Fundamentals
Jobless claims disappointed investors today turning in 412K versus 385K last week. This sudden surge in jobless claims also turned its 4 weeks moving average upwards, resulting in the market opening deep in the red. However, today's market action is also largely technical in nature as bargain hunters zipped into the weakness and lifted the market back up to breakeven by the end of the day. This could also reflect investors' optimistic expectations for tomorrow's Empire State Index being a leading indicator for the ISM index.

Technicals
Indeed, today's market action is largely technical driven as traders zipped in right when the Dow touched its 30/50MA line (which is right about the same level now), bouncing the Dow right off the line in an impressively bullish move. As I have mentioned before, the Dow needs to retest the 30/50MA line before it can make new highs in a healthy manner and today's intraday testing of the level and successful rebound off it seems to tell that story. However, as traders, lets wait for at least one good up candle before coming to this conclusion. If for any reasons (and there are plenty of fundamental reasons for that as well from developments in the Japanese nuclear crisis to the apparently short term worsening economic data) the Dow ditches tomorrow and breaches the 30/50MA, the big double top formation would still be formed for possibly more lows.

For now, the Dow turns a short term neutral trend, intermediate bull trend and primary bull trend.
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Market Hit by Nuclear Toxic

The Dow fell 117 points today along with global markets as Japan upgraded its nuclear disaster to level 7.

Fundamentals
The Japanese Government surprisingly upgraded its nuclear disaster from level 5 to level 7 as the crisis reveals itself to be less controllable than initially thought. World markets slumped on the news starting from Asia. The US market was hit even though retail data turned in better than expected today. Investors rushed back to bonds, depressing bond yields across the board and traders quickly took put options positions either as a hedge or as a Bearish Strategy, causing a surge in the total equities put call ratio to above par in favor of put options trading.

Technicals
Much to our surprise, the Dow decided to turn down to retest the 30MA today despite being already way off short term overbought condition. Of course this move is more events driven than technical but it will be one which technicians will be watching closely as a failure to hold support at the 30/50MA level will form a big double top formation possibly leading to challenging the March lows.

For now, the Dow turns a short term neutral trend, intermediate bull trend and primary bull trend.
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CPI Week Ahead

The Dow gained a meager 0.03% last week in a sideways trading week as we expected.

Despite all the good and bad news in the market, investors seem to have a mind of their own as the market traded largely technical driven last week. With the Dow at its short term resistance level of 12,400 and the market short term overextended after the strong two weeks rally, plenty of short term profit taking can be expected while the last of the herd continue to pour into the market. As I have mentioned, the market either retest its short term support level at the 30MA or wait for the 30MA to catch up before going higher. At this point of time, since the 30MA line is already so near, either scenario don't make much difference as upside potential outweighs downside potential.

The week ahead is going to be slightly volatile since it's options expiration on Friday for April options (see Stock Market Calendar). It is also CPI week this week with CPI releasing on Friday as well. The Feds are watching this number in order to decide when to raise rates which makes it an important number of investors as well.
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Dow Continues To Struggle Sideways

The Dow went sideways today as the service industry and store sales slowed, closing downwards marginally by 6 points.

Fundamentals
Even though ISM services and redbook reported disappointing numbers, the market still found strength to climb back up from a negative open until the FOMC minutes released in the afternoon. Even though the FOMC minutes were largely as expected, investors still sold off following the release, leading to a mixed close. The sense of the market being overextended is still strong and strong intraday profit taking is now evident. As such, I won't be surprised to see the kind of short term profit taking retreat I spoke of last week.

Technicals
The Dow continues to struggle at its short term 12,400 points resistance level. Such resistance usually resolves itself in two ways; Retreat to retest short term support before rebounding to new highs or go sideways until 30MA or 50MA catches up before making new highs. Of the two ways, a retest of the short term support, which is the 30MA in this case, would better guarantee a steady bull trend going forward. As such, it might be a good time to start identifying mid term candidates in order to prepare for an entry when the breakout first reveals itself.

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

The Dow gained 1.28% last week as it runs up against its short term resistance level at about 12,400 points, which marks the February high.

The US market had an impressive showing so far with incredible resilience in the face of global turmoil and a general sense of the market being overextended.
In fact, investors are resilient enough to continue buying into last Friday's better than expected jobs report but with much lesser enthusiasm than before. This, along with the short term resistance and the grossly short term overbought market, means we still might see profit taking in the days ahead as we go into this quiet second week of April which does not have any major market moving releases scheduled.

Lets see how the market work out this week.

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