Stock Market Analysis

Wednesday, May 15, 2013

Dow Bucks Poorer Than Expected Economic Data

The Dow gained 60 points despite worse than expected economic numbers.

Fundamentals
The bulls continued to power ahead today despite worse than expected results on several important economic data. Of note is the huge dip in the Empire State Index from 3.05 last month to -1.43 this month. This is the first negative showing on this Fed watched indicator this year. Despite this poor showing which suggests a flatlining in the manufacturing sector, the market continued to power upwards, baffling investors who actually returned to the safety of bonds, depressing bond yields across the board. Indeed, the market can remain irrational longer than you can remain liquid. However, if economic data continues to come in poorer than expected, the market shouldn't be expected to hold up against them.

Technicals
At this point, the Dow has completely erased all previous hints of an intermediate correction and has resumed a strong bull trend. How far can this run before an intermediate correction hits? That's everyone's guess and as a trend trader, it is not up to us to make predictions. All we do is read the quality of a trend and trade according to it. At this point, there is nothing in the books to suggest any short term possibility of a significant correction.

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

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