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Minyanville's T3 Daily Recap: Stocks Fade After Early ISM-Fueled Rally


Gold's macro pattern remains intact.

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MINYANVILLE ORIGINAL The market made a green start to May, but closed the day very weak after early strength. The 10 a.m. ISM Manufacturing survey that kicks off the data calendar each month exceeded expectations, triggering a sharp rise in stocks until noon eastern time, when all momentum seemed to disappear from sight. Indices hardly got a positive tick the rest of the day and gave back the majority of those morning gains. The S&P was strongest, finishing 0.57% higher while the Nasdaq gained only 0.13%.

US economic data had been weakening a bit in recent months, so it is positive to see a healthy reading from supply managers, but the market's reaction to it over the course of the whole day can hardly be seen as exciting. Traders like to gauge the action following a big piece of data. In strong bull markets, stocks often rally even in the face of worse than expected data, and can explode after a much better than expected report. The opposite holds true for weaker markets, which is evidenced by selling bad news. This news was not completely sold off, but the response from investors was lukewarm at best.

Right now, we're in a tough spot to measure short-term composure in the market. While last week's rally seemed to put a bullish spin back on the stocks, there are some mixed signals. Leaders like Apple (AAPL) continue to falter a bit. The stock rallied hard from near its 50-day moving average in the morning, but gave back the entire move in the afternoon, closing on the lows to put in an ugly candle.

Gold (GLD), which had been strong heading into the ISM number, sold off sharply following the survey as the need for QE3 seemed to be diminished with the strong reading. The precious metal was able to steady itself, though, and the macro pattern remains intact.

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Scott Redler is long ZNGA, AGU, XOM, POT, SLB, BAC, DNKN, LNKD, LNKD calls, GLD, GM, MSFT. Short SPY.
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