Stock Market Analysis: 10/29/2009

The heavily anticipated GDP number came out much better than expected at 3.5% against a consensus of 3.2%. This set up a fairly uncommon uptrend day following yesterday’s down trend day. SPY regained all of yesterday’s loss but QQQQ and IWM are not confirming this at this point. Don’t be surprised if we give back half of today’s gain tomorrow. The big question is whether the pullback is over or pausing (hint: you shouldn’t be trying to answer that question). Bears have been battered in the past trying to pounce on a downward move that never materialized but at some point, it is bound to happen. Levels to watch tomorrow will be SPY 106.80 (today’s high, also a 50% short setup), 107.33 (50% short setup of entire downtrend), SPY 108 (breach would likely mean a retest of highs).

Economic Data: Core PCE Price Index m/m (0.2%), Personal Spending m/m (-0.4%), Chicago PMI (48.6), Revised UoM Consumer Sentiment (70.1)

Earnings: None

Evening reading:

• Long term view of $NYMO (Quantifiable Edges)
• Don’t trust the rally (Kirk Report)
• Big GDP Number:3.5% (Big Picture)
• Trader Reality Check (Crosshairs Trader)
• Homebuyer Tax Credit Update (The Baseline Scenario)
• What does a smart brain look like? Inner views shows how we think (Scientific American)

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