Stock Market Analysis

Thursday, April 28, 2011

Bulls Rule Despite Worse Economic Data

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

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.

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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