Bull Trap Day?

The Dow gained 106 points today despite continued worsening economic data.

Fundamentals
US market was decidedly positive on this second last trading day of April despite economic data continuing to turn in worse than expected. However, on closer investigation, the market today wasn't really as bullish as it looks. Trading volume was the lowest this month so far, giving very little credit to the move today. Investors also didn't reallocate strongly back into equities from bonds like what truly bullish days should be like. Options traders also didn't get onboard as they continued to keep total equities put call ratio in the uncertainty range. All in all, today's bullish day looks more like a bull trap before the "Selling in May and Going Away" begins.

Technicals
If its not for the reasons above, the Dow truly looks like it has completed a bullish continuation pattern. The Dow also failed to beat the April high, which is an important level to break in order to confirm the bullish continuation pattern. All in all, the intermediate correction looks set to start at around this level and I would definitely not be newly long right now.

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

Sell In May and Go Away?

Dow gains 24 points today on better than expected Jobless Claims.

Fundamentals
Jobless claims turned in far better than expected today, turning in 339K vs consensus of 350K. This release comes as a great relief to investors besieged by worsening economic data for weeks. Investors reallocated back into equities, raising bond yields across the board slightly and pushing the market to its intraday high in the morning session. However, it doesn't take long for short term profit takers to step in and take the market back down in the afternoon. Indeed, traders are currently selling into the strength on the uncertain short term outlook. A single good economic data just isn't going to change the whole picture. Options traders continued to keep total equities put call ratio near par in a vote for uncertainty and the VIX also turned in positive today rather than negative. Whenever the VIX turned in the same direction as the market, it puts a question mark on the move for the day. In a truly bullish day, the VIX should be negative rather than positive. All of these suggest that today's positive day may not truly be all that "positive".

Technicals
That immediate drop into a intermediate correction that I mentioned on Monday didn't happen. In fact, the Dow managed to get back above its 30MA but failed to make a new high. Indeed, getting back above the 30MA isn't necessarily a good thing for the market as it only builds up even more uncertainty and denies good entries. In fact, all it does is to set up exit points for the more savvy investors before the inevitable intermediate correction hits and that was what we saw in the market today. Yes, the intermediate correction is still in the books and the longer the market struggle against it, the harder it will eventually hit. I won't be surprised with the market turning around from here and go back below the 30MA line when investors "Sell In May and Go Away". Yes, it is the dreaded May Phenomena which usually hits when the first 4 months of the year are bullish. The intermediate correction might tie in with this phenomena this year and this is definitely no time to be newly long for short to mid term trades.

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

Dow Struggles Against Worsening Economic Data...

The Dow closed higher by 20 points today despite worsening economic data.

Fundamentals
US market continued to struggle today against worsening economic data even after the impact of the Boston bombing begins to subside. Economic data has generally turned in worse this month so far; the poorer than expected Chicago Fed today led the market to a volatile opening that saw the Dow sink almost 100 points lower in the morning. However, bargain hunting stepped in quickly and brought the market back up to par by the end of the day. Economic data also hit periods of volatility even in a recovery, just like stock prices, and we are clearly in one such period. Options traders continued to express short term uncertainty by keeping total equities put call ratio around par while yields on some midterm bonds drop as some investors reallocate to the safety of bonds. Overall, even though it is technically a positive day, the undercurrent is definitely anything but positive. Uncertainty continues to be the theme for the short term.

Technicals
The Dow made nothing more than a sideways day today. It is now crawling dangerously beneath its 30MA which can easily and quickly sink downwards into an intermediate correction and it takes just one negative day to do that. With the market futures already pointing downwards, chances are high that tomorrow would be that negative day. If it is, then there is little doubt left that this might be the start of the intermediate correction that I have been talking about for a couple of weeks.

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

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Multiple Disasters Strike US Market...

The Dow took a huge 265 points hit today as economic data continues to disappoint and as new terrorism hits homeland.

Fundamentals
A slew of really bad news hit the press today, giving the US market its most powerful blow so far this year. A tragedy on homeland America struck the Boston marathon as terrorism rears its ugly head once again, rekindling terrorism fears. As though that is not bad enough news, the Empire State Index turned in less than half of expectation at only 3.05, a huge drop from last month's 9.24! This suggests a significant slow down in the manufacturing sector which demands attention. As if that is not enough, the Housing Market Index also slummed from 44 to 42. The housing market is an extremely important one in this recovery since it was one of the main reason for this economic downturn. It had been on the up and up almost all of last year but has been on the down and down all of this year. All of these culminates to the biggest single day drop for the year of 265 points. Does this mean the start of the intermediate correction that I have been expecting?

Technicals
Despite worsening economic data, the Dow continued to be strong last week and at last gave in to the pressures triggered by the fundamentals above today. Does this mean the start of an intermediate correction? Well, it is very likely even though we should see a few slightly positive but largely sideways days from here onwards as some bargain hunters step in. How the Dow hold up around the 30MA right now would tell me if this is the start of the intermediate correction. If the Dow should fall under and stay under the 30MA for 2 days, that would signal me to prepare for shorts.

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

Growing Sense of Danger...

The Dow closed higher today by 59 points despite economic data continuing its volatility.

Fundamentals
No doubt the recent economic data, including today's, have been volatile inclining in favor of bad news. However, despite the lackluster sales data today, US market still took off into the black after struggling for the first few initial hours. Market action today tells me that investors are slowly selling out of the market while the that has missed the whole quarter of profits is now stomping in. In a truly strong day supported by the professionals, bond yields usually rise across the board as these big investors reallocate from the safety of bonds back into equities. However, what we saw today is shorter term bond yields being stagnant and some even dropping! That's right, this means that investors are actually moving back into safety, which could account for why the market took such early pressure. Now as we look at the Total Equities Put Call Ratio at what options traders, which are mainly retail speculators, are doing, we saw a huge drop blow 0.7 in favor of call options trading! Yes, the herd truly is moving in strongly! What happens when the herd moves too strongly? The trend runs out. The last time total equities put call ratio took a nose dive below 0.7 after a significant multi-month rally was back in 19 Sep 2012. That led to a huge intermediate correction. This somehow coincides with my prediction that the market is due an intermediate correction as well... could this be the start?

Technicals
Once again the market finds itself at a crossroad, two paths lie ahead; a small and narrow road upwards and an easy and broad way downwards. Even though the Dow has made its second consecutive positive day this week so far, it has merely been trading within a sideways channel since the rally ran out of steam in mid March. Like I said last week, without a good intermediate correction, the market cannot move any further upwards without a growing sense of danger. The huge bearish divergence created last week continues to remain true and the dynamics stated in the fundamentals above reinforced that prediction. Odds now truly favors a move to downside for the intermediate term from here onwards.

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

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Fake Out Ends...

The Dow closed down by a huge 111 points as ADP employment predicts bad numbers of this Friday's Jobs Report.

Fundamentals
Early continuation of yesterday's strength quickly dissipated as realization of a probable poorer than expected showing in this Friday's Jobs Report sets in. ADP employment report turned in much worse than expected at 158,000 vs consensus of 205,000, sending a strong negative signal on a possible upset for this Friday's grandfather of all economic reports; The Jobs Report.  Investors rushed for the safety of bonds, depressing bond yields across the board significantly as options traders pushed total equities put call ratio above par in a bearish vote favoring put options. It was a decidedly negative day as investors took the opportunity to sell off following yesterday's herd buying. Economic data also seem to be entering yet another period of volatility following the stream of good numbers over the past month. This period of volatility do coincide nicely with the now widely speculated intermediate correction.

Technicals
The Dow took back all of the gains of yesterday's fake out, and more, completing a strong bearish divergence that has all the looks of the start of an intermediate correction. Indeed, I have been expecting the market to go into a healthy intermediate correction since last week as investors and traders take short term profit off an already impressive quarter. Such intermediate corrects sets up better entry points that encourages new buying that will take the market to new heights. The last intermediate correction happened back in October of 2012, taking the Dow from 13,600 to 12,500 before new buying returned to push the market into the new highs we see today. As such, intermediate corrections should not be viewed in too much of a negative light.

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

Dow Sideways Following ISM Index

Ain't no April Fool in the market today as the Dow halted its advance, closing 5 points lower on poorer than expected ISM Index.

Fundamentals
After weeks of encouraging economic data, investors were greeted with the first piece of significant bad data as ISM Index turned in worse than expected at 51.3 vs 54.2 last month and a consensus of 54.0. Yes, analysts do expect ISM index to turn in slightly worse than last month but not by this much. The Dow was halted in its advance but did not turn downwards significantly. However, investors were already returning to the safety of bonds, depressing bond yields as options traders pushed total equities put call ratio up to 1.0, signifying complete short term uncertainty. Indeed, the market has been extremely resilient so far this year and market action today displayed that kind of resilience despite such significant bad showing on the ISM Index. The ISM Index is an index for manufacturing activities and typically shows a growing manufacturing sector above 50.0 and a contracting one below 50.0. Investors place significant emphasis on this data because it is always the first data out each month and its strong correlation to GDP.

Technicals
Even though the Dow closed lower today, it was in actual fact just another sideways day as the Dow continues to wait for its 30MA to catch up before having the momentum for one final push up. Interestingly, the Dow has already started forming a bearish divergence at this level. This usually mean a significant short term drop to slightly below the 30MA like what we saw back in January and February. However, with the prospects of an intermediate correction being imminent, this could also signal the start of the intermediate correction itself. How the Dow hold up at the 30MA will tell us if this is just a healthy short term pullback of the kind we saw back in the past few month which always leads to new highs, or is this the start of something more significant that the market is currently due for. Even if the Dow does recover after touching the 30MA, I would still be careful for an intermediate correction in the near term horizon. All in all, not the best time to be enthusiastically newly long.

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