Growth Hope Powers Rally

The bulls stuck it to those bears yesterday, which had eagerly shorted the equity market ahead of time in anticipation of the historically worst month of the year approaching.

The ensuing rally was based on short covering along with renewed hope as better than expected manufacturing numbers and strong economic reports from China and Australia cheered investors.

Of course, as always, one day does not make a trend reversal, but at least it was a good start. Whether hope, in the face of additional upcoming market removing reports, will lend sufficient support for the bulls remains to be seen.

It appeared to be more like a relief rally than anything else in that bad news was expected yesterday and it did not happen. Statisticians point out that while the first trading day of the month has been a winner for most of the year, it is not a good predictor of outcome for the remainder of the month. Case in point was August, during which the Dow powered higher by 208 points on August 2, but ended the month with a loss of 4.3%.

As I said before, low volume can distort market direction, and we will have to wait for Friday’s unemployment numbers, and Wall Street’s reaction next week, when all traders return refreshed and eager to push the buy and sell buttons.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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