Stock Market Analysis

Thursday, June 16, 2011

Philley Fed Disappoints...

The Dow took back 64 points after yesterday's drop despite far worse than expected Philley Fed.

Fundamentals
The Philley Fed turned out much worse than consensus as I have expected in yesterday's email to paid subscribers. Much like the Empire State Index, the Philley Fed turned in negative versus a very positive consensus. In fact, the Philley Fed, which measures general manufacturing condition in the Philadelphia Federal Reserve district, turned in its worse number since the recovery begun back in 2009, pointing with almost certainty that the ISM index next month is going to turn out pretty nasty. Investors rushed back to bonds from equities on the release, further depressing the already low bond yields. However, despite all the fear in the market, bargain hunters still managed to end the Dow higher today. The VIX, which has been unsually low throughout this intermediate correction, has started to surge these two days as fear breaks loose. Tomorrow's Quadruple Witching is going to be a volatile day but not one which is expected to make any big moves as Quadruple witching days are usually high volume days with very limited trading range.

Technicals
Not surprising to see some bargain hunting after such a decisive down day yesterday. With the VIX, Total Equities Put Call Ratio and economic data favoring to downside and plenty of room to go before getting back into short term oversold condition, I do see the Dow making a decisive move down to its 200MA soon. No, I do not think this is going to be a "Double Dip". As I explained in my email to paid subscribers yesterday, this correction is everything a normal intermediate correction within a primary bull trend is.

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