Stock Market Analysis

Thursday, May 31, 2012

Economic Numbers Continue Deterioration

The Dow made a volatile sideways day today, closing slightly lower by 26 points.

Fundamentals
Market headed lower right off the gate today as every single economic data released today turned in worse than expected; Higher layoffs, worse employment expectation, higher jobless claims etc. Even though it looks pretty ugly, bargain hunter still stepped in early in the session and brought the market back into the black by mid-day. I won't read too much into this "strength" since investors actually ran back into the safety of bonds today, depressing bond yields across the board and options traders continued to keep total equities put call ratio between 0.9 and 1.1, which signifies a largely uncertain market. Tomorrow, we will have the heaviest economic numbers of the week, the jobs report and the ISM index. From the way economic data has presented themselves this month so far, it doesn't look like investors are going to be positively surprised. And if there are no strong positive surprises tomorrow, we could see the market landslide further.

Technicals
The Dow has been largely predictable in its behavior so far, truly textbook correction. It turned around at the 12,600 points yesterday just like I said it would 2 days ago. Market cannot be more predictable. Its next target would be the 12,200 points where it would test the resilience of buyers around that area. Yes, I think the market would still linger between the 12,600 and 12,200 points level a little longer before things get better.

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

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