Thursday, October 29, 2009

Market outlook for October 29, 2009: Up

Ok, here's the big news of the week out fresh this morning. First there's the GDP number. GDP was up 3.5% for 3Q. Then there was the weekly Jobless Claims. Weekly Jobless Claims came in at a loss of 530,000, which was better than expected also. Continuing Claims came in down 147,000 jobs to 5.79 Million jobs. Overall the Dow Futures surged up on the news from being up 23 to 70 in pre-market.

This seems to suggest a bounce back up today in our markets. After the surge in pre-market, the Dow has backed off a bit to now being up 58. However, European markets, which were all down before our GDP numbers were announced, are now all in the positive, which confirms to me today will be up.

When looking at the Dow chart, as you can see above, we have been here before over the past 6 months.. The market rises, then pulls back a little when we expect a correction only to reverse again and go back up. We are at another of those inflection points now. We may go back up again.

While the market may close up for the day, it will be important to watch Volume. Yesterday's Volume was stronger than Monday and so the drop was even more emphatic yesterday. If today the market is up but on lighter volume, then the move up will be less believable and I would use the day to buy some ETF Shorts. If the Volume is stronger today, I would Sell some of my ETF shares in my shorts positions.

On a final not this morning, the well respected Art Cashin this morning on CNBC said that the markets came within a hair to a complete meltdown yesterday because of the U.S. dollar rising yesterday. He believes if the U.S. Dollar can stay calm, we could be OK, but if it starts to rally up like it did yesterday, the entire house of cards can collapse and investors will be selling all asset classes, including equities, in total abandonment.

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