Market Sells Off On Dismal ISM Index
Welcome back from the long weekend! The Dow took a 54 points hit on this first trading day of September on disappointing ISM Index.
Fundamentals
Investors strangely bought strongly last Friday ahead of the long weekend and the first big economic data to hit coming out of the long weekend; ISM Index. It was as though investors were expecting a better showing after last month's dismal below 50 indication on the ISM index. Indeed, consensus are for the ISM index to climb back up to the 50 line which it failed to do so today. Market sold off hard right after the ISM index turned in at 49.6, yet another reading below 50 indicating contraction in the manufacturing sector, and a lower reading than last month's 49.8. It was truly a dismal report which got short term traders running in the morning while bargain hunting investors took over in the afternoon, taking the NASDAQ100 back up to positive while closing the Dow and SP500 way off their intraday lows. Bond yields also rose slightly across the board as investors bought into equities on the weakness as if they already knew in advance the Fed might do something about the continued weakness... and they just might...
Technicals
The trading action today as well as the poor ISM index continues to support this volatile bull trend pattern. In a volatile bull trend, economic data usually behave extremely volatile with investors buying into each showing of weakness after short term sell-offs, creating the kind of big spikey waves which goes in a generally upwards direction. This is exactly what volatile bull markets are all about. Over the past few months, the Dow has reversed upwards after staying a couple of days beneath its 30MA and with the way investors are bargain hunting into the weakness, there is no reason to believe that it will be any different this time round.
For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.
Fundamentals
Investors strangely bought strongly last Friday ahead of the long weekend and the first big economic data to hit coming out of the long weekend; ISM Index. It was as though investors were expecting a better showing after last month's dismal below 50 indication on the ISM index. Indeed, consensus are for the ISM index to climb back up to the 50 line which it failed to do so today. Market sold off hard right after the ISM index turned in at 49.6, yet another reading below 50 indicating contraction in the manufacturing sector, and a lower reading than last month's 49.8. It was truly a dismal report which got short term traders running in the morning while bargain hunting investors took over in the afternoon, taking the NASDAQ100 back up to positive while closing the Dow and SP500 way off their intraday lows. Bond yields also rose slightly across the board as investors bought into equities on the weakness as if they already knew in advance the Fed might do something about the continued weakness... and they just might...
Technicals
The trading action today as well as the poor ISM index continues to support this volatile bull trend pattern. In a volatile bull trend, economic data usually behave extremely volatile with investors buying into each showing of weakness after short term sell-offs, creating the kind of big spikey waves which goes in a generally upwards direction. This is exactly what volatile bull markets are all about. Over the past few months, the Dow has reversed upwards after staying a couple of days beneath its 30MA and with the way investors are bargain hunting into the weakness, there is no reason to believe that it will be any different this time round.
For now, the Dow remains in short term neutral trend within an intermediate and primary bull trend.
posted by Jason Ng at 10:46 PM
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