Stock Market Analysis

Thursday, May 05, 2011

Jobless Claims Makes Largest Surge Since Recovery

The Dow took a second day hit today, closing lower by 139 points as jobless claims continue to disappoint.

Fundamentals
Jobless claims continue to disappoint investors this week, turning in 474K versus consensus of a lower 410K. Indeed, investors looked past last week's higher jobless claims as a one off event but this week's disappointment says something might really be wrong in the economy. In fact, these two weeks marked the largest surge in jobless claims since the recovery started in 2009. So, is this still the short term trend of economic data volatility that I keep talking about? Yes it is. The economy is recovering but never straight up. There will always be periods like this which makes everyone wonder if a "double dip" is going to strike but it will all work out fine. Of course, today's jobless claims did give institutional investors more reason to "Sell In May and Go Away". Bond yields ditched across the board today as safety hungry institutional investors reallocate back into the safety of bonds. Since much of the pessimism seems to have been priced in already, tomorrow's Jobs Report might actually be a positive no matter how it turn out. Lets see what happens.

Technicals
As I have mentioned all week long, we do expect the Dow to go as low as 12,400 in order to properly digest all of the short term overbought condition before the market can make new highs. We would want to see support hold at 12,400, which coincides with its short term 30MA support as well. If the market holds and turns around at that level, or earlier, we should see another nice leg up to new highs.

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