Friday, December 10, 2010
Stock Market Commentary:
Stocks ended higher this week as the tech-heavy Nasdaq and small-cap Russell 2000 indexes continue to lead their peers and hit new recovery highs. In the future, to avoid any confusion, we are no longer going to use outside resources to label, instead focus on what has worked exceptionally well for us over 7 years, our own analysis. A popular outside source changed their label last Friday to Market in a confirmed rally, without a proper FTD emerging. This is bizarre and frankly plain irresponsible. From our standpoint, the rally that began on September 1, 2010 is still intact and we said that in our commentary on November 16, 2010 when the outside source said the rally ended –Full Story here. However, we changed it to be inline with them but that was clearly a mistake. If anyone has any questions about this, please feel free to fill out our contact form and we will be happy to address it in more detail.
Monday & Tuesday’s Action: Stocks Rally
On Sunday, Fed chairman Ben Bernanke appeared on CBS’s 60 minutes and reiterated his recent stance on the economy and QE II. Bernanke said the economy continues to grow, albeit slowly, and left the door open for QE 3, if needed. Monday was a quiet day on Wall Street but the big story of the day was gold and silver. A slew of gold and silver stocks soared (NG, HL, IAG, AEM, ABX, etc.) after gold and silver futures advanced in heavy trade.
The gains were short lived as gold and silver both fell on Tuesday in heavy volume after encountering resistance near their 2010 highs. The abrupt failure, suggests these markets need to spend more time basing before moving back into new high territory. Elsewhere, US stocks opened higher and hit a new recovery high on Tuesday after the Bush tax cuts were extended and a new round of additional cuts were announced. After Monday’s close, the government said it would extend the Bush tax cuts which is viewed as a net positive for the economy and the market. Mohamed El-Erian, PIMCO’s co-CIO told Bloomberg that the new agreement worked out by the Obama administration is good for growth. El-Erian is best known for his prescient calls on the market and the economy. Therefore, when he speaks, we listen.
Wednesday-Friday’s Action- Narrow Range:
Stocks traded in a very tight range for the rest of the week as the euro and several commodities fell. This illustrates how resilient the US stock market is as it simply refuses to fall and stubbornly holds onto its gains. On Thursday, the Labor Department said initial jobless claims fell to 421,000 last week which was less than the Street’s estimate of 425,000. On Friday, US consumer confidence rose to a 6-month high and the US trade gap narrowed more than forecast as the USD weakened.
Market Action- Market In Confirmed Rally Week 15
It is encouraging to see the bulls show up and defend the 50 DMA lines for the major averages. The market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. Put simply, stocks are strong. Trade accordingly. If you are looking for specific high ranked ideas, please contact us for more information.
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