Market shrugging off good news?

ISM data for the first time in 18 months showed expansionary economic activity with the reading of 53 but markets are now selling off. Seems the market has been doing this for the past couple of weeks hasn't it? Bears I'm sure are saying "see, the market is ignorning good news, it's gonna tank now". Well, I've seen this sort of thing happen before and it's not neccessarily true although this sort of behavior is in fact what you see at major turning points.

How many times did we see the market ignore bad news in the bear market and rally strongly only to give back those gains and hit new lows a few weeks later? I can remember plenty of times. The same thing occured during the last bull market. For the first 2/3 of 2004 even though the economy was clearly on the rebound the markets were drifting downwards which gave bears hope that the run was over and frustrated the hell out of the bulls, but then come the fall the market rocketed upwards. So why does this happen? It's simply a matter of market fatigue. Quite often after the market has had a big move one way or the other it will often go through a digestion period to work off the extreme overbought/oversold condition and shake off the Johnny come lately's. Quite often people will mistaken a consolidation phase with a major topping/bottoming process...it can be difficult to distinguish them from each other.

I've mentioned for a couple weeks now that I believe we are in a consolidation phase. The line in the sand to make me think otherwise would be if the market gets about a 10% correction from the most recent peak. I'm going to use a close below 940 as the threshold. ST sentiment still isn't favorable enough to warrent a long position aside from intraday scalps. I don't like trading those moves because there's not much difference between scalping and gambling. I find it is far too random...but to each his own.

I'm going to give credit where credit is due to the bears today. They defended the good news very well and if the market can close down towards the low of the day it would be quite a victory. Bravo bears bravo!


And now here's a song appropiate for what I'm feeling