Dow Continues Sideways On Mixed Economic Data

The Dow closed marginally lower today by 14 points as economic data continues to turn in largely mixed.

Fundamentals
Economic data continues to turn in largely mixed today, resulting in yet another lackluster trading day. Numbers today were actually good and support the economic recovery scenario (giving the bulls some reason to be bullish), but are just not as good as expected (giving the bears some reason to be bearish), resulting in yet another lackluster day as bulls and bears slug it out once again. Bond yields remain largely unmoved as investors take a more neutral stance today. VIX is slightly higher today with the slightly lower market so no surprises on that front. Overall, an undecided market ahead of the coming May... are investors going to sell in May and walk away especially since its been a great year so far? It seems likely...

Technicals
The Dow continues to crawl along the 13,200 points level today, proving it to still be a strong resistance level in the face of plenty of uncertainties in the market. If the Dow turns back down from here, it will complete an intermediate double top formation which can be disastrous. As such, in the face of all of these uncertainties, this is a good time to take profit and sit on the sides.

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

Dow Breaks Out!

The Dow gained a huge 113 points as investors celebrated the better than expected Pending Home Sales.

Fundamentals
Much better than expected Pending Home Sales released at 10am totally erased the pessimistic and lackluster mood set during the opening half hour by the worse than expected jobless claims and Chicago Fed. Investors seem to be paying a lot of attention to housing data lately as better than expected housing data seem to offset the effects of poor showing on other important economic data. Even though today's rally was quite encouraging and marks the third consecutive up day for the Dow, investors were somehow not going back into equities as bond yields actually dropped suggesting investors were still returning to the safety of bonds. This cast some suspicion on the sustainability of this 3-day rally and we could actually see some profit taking tomorrow ahead of the weekend as uncertainty continues in the market.

Technicals
The Dow made a nice and important breakout back above its 30MA today. As I mentioned over the past few days, if the Dow doesn't make it back up there quickly, this correction could go on much deeper. Today's rally did change the downside inclination of the market into yet again a sideways uncertain one. Today's rally also came on the back of relatively low volume so participation is definitely still lacking and we could see the Dow retest its 30MA over the next couple of days. Failing which would increase the likelihood and intensity of the correction.

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

Mixed Market On Mixed Economic Data

The Dow gained 74 points while the Nasdaq Composite dropped 8 points in a mixed trading day on mixed economic data.

Fundamentals
Economic data continues its volatility with largely mixed numbers today, adding on to the uncertainty that has been prevalent in the market lately. As I mentioned the last time, this is yet another period of volatile economic data which will no doubt steady up again into the recovery scenario in the weeks to come. That's how economic data behave, like the stock market, in waves and never straight up. Investors actually returned to equities today, raising bond yields across the board but options traders continue to keep total equities put call ratio above 0.9. All of these continue to suggest a largely uncertain market due to both fundamental and technical forces.

Technicals
The Dow continues to struggle around the 13,000 points level and below its 30MA dangerously. Failing significantly at this level would confirm this as the intermediate correction that I have been talking about for so long. With May coming up and the volatility in the fundamentals, it seems unlikely for the market to make an upside breakout for one final leg before the real intermediate correction. This seems much more likely to be that correction.

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

Economic Data Volatility Begins

The Dow lost 68 points as economic data becomes more volatile.

 Fundamentals
Like stock prices, economic data doesn't go straight up or down. It usually goes up or down steadily for a few weeks or months and then go into a period of volatility where some data will come in very good and some very disappointing. This usually goes on for a few weeks more before the previous trend resume. Sounds exactly like the stock market, right? In a way, the stock market behaves the way it does due to the way economic data and the economic performance they represent behave. Right now, we are clearly in one of these volatile economic data period once again as today's economic data turned in largely disappointing, leading to a negative trading day. The better than expected Leading indicators did nothing to reverse the largely negative tone set by the disappointing jobless claims, existing home sales and Philley Fed. Even though market is volatile today, investors really didn't return to the safety of bonds in the big way we would expect of a very negative day. Bond yields barely nudged downwards suggesting that investors really isn't as negative about all these as they are supposed to. Options traders continue to be uncertain and continue to sit on the fence, keeping total equities put call ratio exactly at 1.0 (read more about what Put Call Ratio is all about). All in all, it was a negative day with a very uncertain tone to it. Investors and traders weren't all out bearish even though the market ended in the red but neither did they display any signs of bullishness as the market continue to trade with a sense of being overdue a significant correction and that investors are waiting to "sell in May and walk away".  

Technicals
The Dow made a dangerous followup to downside today, turning down from barely above the 30MA two days ago. This could be the start of the intermediate correction that I have been talking about so far especially now that fundamentals are supporting to downside as well. Immediate support would be the April low, failing which will confirm the intermediate correction. The only way out of this is a strong up day tomorrow but it would be a tough call with April options expiration tomorrow. The market is now more inclined to going into an intermediate correction than to recover to upside.

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

Mixed Day On Deteriorating Empire State Index

The Dow closed higher by 71 points while the Nasdaq closed down by 22 in a mixed trading day as Empire State Index deteriorates.

Fundamentals
Market cheered to the higher than expected retail sales figure released before market open only to be immediately greeted by selling into the strength the moment market opens due to the poorer than expected Empire State Index released at the same time. The Nasdaq composite was taken all the way down into the red and never recovered while the Dow and the SP500 did find some strength and remained positive through closing, resulting in a mixed day. It seems like the bulls and bears are somewhat equally matched today with bond yields declining only by a touch across the board. Total equities put call ratio continue to be within the 0.9 to 1.1 range, suggesting a largely uncertain market. Indeed, there are many forces at work as May draws nearer, both fundamental and technical and I would say that technicals have been dominating due to the fact that investors and traders alike are expecting some kind of significant correction ahead of May.

Technicals
The Dow continues to crawl along dangerously below the 30MA line and such hesitation to get back on top has led to significant corrections in the past when the bulls start to lose heart. This is especially so when it is now so close to May and investors looking set to take profit on the profits for the strong year so far. I would be watching the April 10 low of 12,700 as a breach of this level would confirm this as the intermediate correction that I have been talking about for so long.

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

Dow Gains on US Trade Gap Shrinkage

The Dow gains 181 points as US trade gap makes surprising shrinkage.

Fundamentals
Global markets were largely positive prior to US market open, setting an optimistic stage for today's market. This optimism was then compounded by a surprising shrinkage of the US trade gap announced at 8:30am, setting the market up for a strong opening and allowing investors to look past a worse than expected jobless claims. This is the first shrinkage of the trade gap after 3 consecutive widening months and the smaller the trade gap, the smaller the drag on GDP growth, hence the positive mood in the market today. Indeed, the macro picture has proven more important than the more micro jobless claims which will definitely improve with an improving economy. This means that the long term outlook of the US market remains solid despite short term volatility. Investors returned to equities from bonds, raising bond yields across the board for a second straight day and options traders also took total equities put call ratio below 0.9 for the first time in 6 trading sessions in support of call options trading.

Technicals
The Dow seems to have finished a significant short term correction so far and is now retesting the 50MA for resistance before it can decide if it is still good for one final leg up before "selling in May and going away". If it fails at this level over the next few days, we could see that big intermediate correction happen right from here onwards. In fact, it is almost certain the Dow is going to make a small sideways day tomorrow as it struggles for strength at this level tomorrow. As such, it is still time to be cautious.

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

Start of Intermediate Correction?

The Dow dropped 130 points today as the market succumbs to mounting resistance.

Fundamentals
US market definitely erased all Easter smiles from the face of investors today. Despite the continued trend in recovering economic data, US came out of Easter weekend today succumbing the bears right off the gate. Indeed, the US market has been largely technical in nature over the past couple of weeks, selling into each show of strength. This is the kind of market behavior that usually precedes a significant correction. Looks like "Sell In May and Walk Away" is becoming "Sell in April and Walk Away" this year as investors move further and further ahead of known market anomalies. Indeed, known market anomalies that has been taught in finance schools for decades has been observed to become gradually earlier than they used to in the past largely because of better education and information allowing investors to move ahead of such known anomalies. Such is the market condition where good news lead to small sell-offs and bad news lead to landslides.

Technicals
The Dow broke through its short term support marked by its 30MA today. Every downside breach of the 30MA could well market the start of an intermediate correction and the market is definitely overdue one such correction now. The possibility that this is the start of an intermediate correction is also supported by the fact that the Dow recently failed at the 13,300 level, making a small double top formation. Such a formation occurring at the top of an extended bull trend can be extremely dangerous and could confirm the start of an intermediate correction if the Dow fails to turn around and get back above the 30MA over the next two days.

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

Dow Sideways Despite Better Data

The Dow moved sideways to, declining marginally by 14 points, despite better than expected economic data.

Fundamentals
US market remained weak today despite better than expected jobless claims and the Bloomberg Consumer Comfort Index climbing to the highest level in 4 years. So far, almost all of the major economic data are screaming "ECONOMY IS RECOVERING FOR SURE!" but investors and traders continue to trade largely in a technical fashion especially with geopolitical events putting a shade of grey on global markets. Options traders are especially cautious, keeping total equities put call ratio consistently above 0.9 over the past 3 days, suggesting an uncertain short outlook. Investors may also be concerned with any negative surprise in tomorrow's Jobs Report even though it is inclined to surprise to upside. A negative surprise would definitely be the catalyst for the overdue technical correction investors have been worried about.

Technicals
The Dow continues to trade sideways, trying to find strength for a topside breakout to new highs. It has also found plenty of support at its 30MA, which is now squeezing the Dow into a congestion between the 13,300 level and its 30MA. With the 30MA still holding as support, the inclination for a breakout continues to be on the upside but lets not forget that even if it does so, the market would very likely go into the overdue intermediate correction perhaps in coincidence with the "sell in May and go away" adage.

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

Dow Gains on Better ISM Index

The Dow gained 52 points today as ISM index beats consensus.

Fundamentals
US economy continues its recovery scenario today as ISM index continue to beat consensus, turning in 53.4 versus 52.4 last month. Investors bought into the great news reluctantly as bond yields barely moved and trading volume lackluster. Options traders on the other hand turned bullish at last after keeping total equities put call ratio above 0.9 for 8 straight trading days (Read about what Put Call Ratio is). Options traders usually keep total equities put call ratio between 0.9 and 1.05 when conditions are uncertain in the market. Anything below 0.9 suggests that options traders are bullish since there is significantly more call options trading than put options trading. Anything above 1.1 suggests bearishness in the same logic. This is the first week of April and heavy weight economic data are released on the first week of every month. The next big one will of course be this Friday's Jobs report. Looking at the way jobless claims have been trending down, we can expect jobs report to be more inclined to beat as well, continuing the economic recovery scenario. Maybe a beat in the jobs report would woo investors back in a bigger way.

Technicals
Trading continues to be more technical than fundamental driven today as the market continues to struggle against making a new high especially with May just one month away. Investors have been so used to "Selling in May and walk away" that in anticipation of such a correction, they may be more cautious and start taking profit strategically even right now. In fact, I saw plenty of selling into the good news and strength today. With an intermediate correction so overdue right now, I would expect on final leg up this month before the correction happens more or more inline with the old adage.

For now, the Dow remains in all out bull trend.