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The Dow is facing pressure from every direction. The bulls are pushing it up. The bears are moving it down. The deals are driving it. And the data is mixing is up. Who knows in which direction this market will trend? Sometimes, it looks like the market will move back across the 13K line. Other times, it appears to struggle to remain in 12K territory. This week is opening with important data promising to move the market. The data is mixed and slightly contradictory. In other words, there is something for both the bulls and the bears to believe in. The deals are on the rise again and the market loves to watch their continuing drama unfold. Sometimes they flourish. Other times, the deals fail. But they are always exciting. These data-and-deal factors are converging to lead to a market that is strongly positive on one day, and then taking a dive the next day. Occasionally, the market is eerily silent. The Dow is not the only market driven by the data and deals so let''s take a look at the global markets.

The Asian markets experienced a very positive day on Tuesday, May 13, 2008. Of course, there was a single exception. While most of the region was making multiple percentage-point gains, the Shanghai index fell nearly 2 percent. Uncertainty and despair following an earthquake that killed 12,000 people is cited as the sole reason for the index''s decline. Communication and transportation disruptions compounded the problem in the Sichuan province. These negative feelings were not felt in the rest of the region. The Hang Seng gained 2 percent, followed closely by Japan''s Nikkei, which rose 1.5 percent. India''s BSE gained 0.7 percent.

The European Big Four group experienced a mixed trading day on Tuesday, May 13, 2008. London''s FTSE was the only loser in the region, trading down 0.3 percent. Switzerland''s SMI gained 1.2 percent. The CAC and DAX made modest gains. However, these gains came late in the afternoon as not-so-negative data from the US was released, particularly the retail sales figure. Even the merger news from Hewlett-Packard Co. ( HPQ) helped to revive the European indexes. Still, as the trading day closes in Europe, the indexes are gaining upward momentum that could fuel a strong opening on Wednesday, May 14 ^th.

Back in the US, the Dow ( $INDU) made a bearish opening, which gained momentum as morning trading proceeded. The index traded down 92 points just before the lunch hour. However, the retail sales report and the H-P merger news are rocking the Dow so a turbulent day is definitely ahead. Let''s go straight to the economic data.

Economic Reports

The retail sales report was one of the big news reports of the trading day. The higher-than-expected figure was somewhat misleading. The retail sales figure for April showed a loss of 0.2 percent, which is down from March''s 0.2 percent gain. However, the expected figure was expected to show a decline of 0.3 percent. So, while this figure was not as low as expected, it certainly was not a glowing example of a strong and vibrant retail sector. Nevertheless, if you remove the auto sales figure from the equation, the retail sales figure jumps to a 0.5 percent gain. Obviously, the auto sector is weighing heaving on the retail sector. The report was released at 8:30 this morning and it is probably one of the major mix-ups felt by the market.

The next big report that the market awaits is the Consumer Price Index. The CPI is one of the few reports with which most people are familiar. Basically, everyone knows that it measures the rate of inflation for consumer products. And that gets everyone''s attention. Analysts are predicting that the CPI will decline from 0.3 percent in March to 0.2 percent in April. That is within the Fed''s acceptable inflationary guidelines. Most of the markets despise inflation so lower inflation is viewed quite favorably. The bond market could get a boost from this declining CPI figure. The stock market could also have a bullish response to this figure. The dollar can have a mixed reaction, but it should primarily be a positive response since it helps to maintain the value of the Greenback. Declining inflation is generally good for the markets and the economy, particularly an economy that is struggling for growth. The CPI figure will be released on Wednesday, May 14 at 8:30am.

The inflation data will continue next week with the release of the Producer Price Index on Tuesday, May 20 ^th. While the CPI is more closely watched, the PPI is also closely monitored for its effect on businesses. When prices increase for businesses, then prices will also increase for consumers. At this time, any price increases for consumers will not be welcome by consumers. However, I think that we can expect that the PPI will probably decline similar to the CPI, if analysts are correct and the CPI does, indeed, decline. Also, next week, the housing data will continue with mother of all real estate sales reports: existing home sales. So, there is a lot of data driving the Dow. Let''s take a quick look at a deal in the tech sector.

Company News

The Dow remained low after the lunch hour. It appears that the bulls cannot get enough momentum to move the bears. The big deal this week is that Big Blue may have a new rival: Hewlett-Packard. Yes, H-P has always been a formidable foe in the tech sector. However, this possible merger could change the balance of power in the entire sector.

As everyone knows, Hewlett-Packard is bidding to purchase Electronic Data Systems, Corporation ( EDS). This move would make H-P the second largest global provider of IT services. How much is that worth to H-P? Well, the bid price for EDS is $14 billion. Unlike the Yahoo, Inc. ( YHOO)-Microsoft Corporation ( MSFT) failed merger, this one seems to be nearly a done deal. Both companies have announced that they are holding advanced talks and, let''s face it, there is a very positive and excited atmosphere surrounding this deal. But like the ABN-Amro ( ABNY.Y)-Barclays ( BCS) deal, there is always the possibility of another interested party stepping in to liven up the deal. Or a bidding war could begin as in the Boston Scientific ( BSX)-Johnson & Johnson ( JNJ) competition over Guidant Corporation ( GDT). So, we shouldn''t get complacent. The fun is just beginning!  In the midst of all the fun, EDS is trading up a percentage point while Hewlett-Packard is down more than 7 percent.

Market Moves Wisdom of the Week

Follow the data and deals! The market responds to the economic data as well as the news and events that develop during the trading day. The data and deals are pieces of a puzzle that develop into a picture of the market. This picture can be very helpful to traders in developing their trading systems, finding good trades, and knowing the right times to enter and exit trades. So the Market Moves Wisdom of the Week is to follow the trail that the data and deals make. This trail can lead to better trades and higher levels of profitability.


Robin Lofton
Staff Writer and Trading Strategist
Profit Strategies.com

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