Stock Market Analysis

Thursday, September 29, 2011

GDP and Jobless Claims Fight Back!

The Dow recovered some lost ground today, closing upwards by 143 points as both GDP and Jobless Claims turned in better than expected.

Fundamentals
US market received a much needed boost of confidence today as both Q2 Final GDP and Jobless Claims turned in much better than expected, leading to a high opening. Q2F Real GDP turned in a surprising 1.3% vs consensus of 1.2%. Even more surprising was the huge drop in jobless claims to 391K. Jobless Claims has not went under 400K since March 2011, making it an extremely significant development on the jobs front. In a consumer driven economy, all good news on the jobs front is good news for the stock market. However, the strength led once again to a steep sell off all the way into the final hour before the bulls fought back for some lost ground. In fact, bond yields continued to drop across the board today suggesting that investors are still using good news as exit points. Indeed, today's good economic data didn't seem to have changed the fundamental lack of confidence that the market is going through right now. It is going to take a lot more, especially developments in the European debt issue, to truly turn things around.

Technicals
Even though the Dow made significant gains today, it still stopped short at its 30DMA, forming a third consecutive lower high and lower low candle. No matter how the Dow closed, three consecutive days of lower high and lower low is extremely bearish and the fact that the 30DMA once again stopped its advance dead in its tracks tells me that the market is in a lot of trouble technically unless something change fundamentally, quickly.

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

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