Stock Market Analysis

Thursday, November 01, 2012

Economic Data Pleases...

The Dow gained an impressive 136 points this second day of post-Sandy trading on much better than expected economic data.

Fundamentals
Jobless claims and ISM index both turned in much better than expected today, spurring strong buying right off the gates. Jobless claims made an impressive ditch while ISM made a second higher month in a row this month, creating a positive mood ahead of tomorrow's all-important jobs report. Could this month's jobs report beat last month's controversial report? Well, at least most options traders are a little skeptical as they once again bring total equities put call ratio upwards above 0.9, which suggests uncertainty. Such a move on a strong up day does cast a shadow of doubt on the move so we might even see some strong profit taking tomorrow no matter how the jobs report turns out (especially so when most traders now think the jobs report is manipulated for presidential election purpose).

Technicals
Like I always teach my students, one strong up day or one strong down day doesn't mean anything. In fact, it could setup a much stronger move in the original direction. In fact, such single day rallies in an intermediate correction typically sets up for the final leg down before the real bottom is reached and I think most options traders think the same way, resulting in the rising of the total equities put call ratio today. I would need alot more evidence before calling this a bottom and going on the bullish trades.

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

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