31 Oct
Daily Market Commentary

Stocks Slide As Record Month Ends; SP 500 Down For Yr!

Monday, October 31, 2011
Stock Market Commentary:

Stocks soared in October and enjoyed one of their strongest monthly gains in ages! Stocks opened October lower but bottomed on October 4, 2011 (the same day the Fed began operation twist) and spent the next three weeks enjoying monstrous gains in anticipation of a Greek haircut. At the end of October, European leaders finally were able to make a deal regarding Greece’s onerous debt levels and agreed to leverage their bailout plan 4 to 5 times in order to handle other debt laden states. The S&P 500 (SPX) is fractionally lower for 2011 while the Nasdaq composite and Dow Jones Industrial Average (DJIA) are modestly higher. Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the SPX and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines.

Stocks End October On A Low Note, Bank of Japan Intervenes To Curb Yen

Risk assets fell on Monday after the Bank of Japan intervened in the currency market to curb their red-hot yen ahead of the G-20 meeting later this week. October will go down in history as the best month for the DJIA since 2002 and the best month for the benchmark SPX since 1991! From the 10/4 low-10/31’s close: SPX jumped +16.6%, NDX +15.5%, DJIA +15%, & R2K (RUT) vaulted +23.15%!
At this point, the market is clearly extended to the upside and due for a pullback. They key is to ascertain the health and duration of the pullback to see if it is an orderly (i.e. normal) pullback or something more severe. With this market and the VIX near 30, anything is possible. From our point of view, the bulls remain in control as long as the SPX stays above the middle of its bullish double bottom pattern; 1230.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and broke above the mid-point/resistance of their 6-week bullish double bottom base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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28 Oct
Daily Market Commentary

Robust Rally Continues!

Friday, October 28, 2011
Stock Market Commentary:

Stocks surged in the final full trading week of October as European leaders finally were able to make a deal regarding Greece’s onerous debt levels and agreed to leverage their bailout plan 4 to 5 times in order to handle other debt laden states. All the major averages are now positive for the year which is a very healthy for this rally. It is also important to note that the Dow Jones Industrial Average is on track for its single largest monthly gain in history and the S&P 500 is on track for its best month since 1973! Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines.

Monday-Wednesday’s Action: Stocks Successfully Test Support!

Over the weekend, EU leaders kicked the can down the road and reschedule yet another meeting on Wednesday to tackle their onerous debt levels. Elsewhere, shares of Catepillar Inc. (CAT) gapped up after topping Q3 estimates and raised their 2012 forecasts. The news on the M&A front was healthy- shares of RightNow Technologies (RNOW) and Healthspring Inc. (HS) gapped up after agreeing to be acquired on Monday.
Stocks fell on Tuesday and turned negative for the week as investors digested the latest round of lackluster earnings and EU leaders kicked the can down the road. Since 2008, we have been telling clients that is impossible to solve a debt crisis with more debt! However, the cognoscenti feel otherwise and as always we shall let the markets guide us.The news from the economic front was less than stellar. Consumer confidence in the U.S. unexpectedly fell in October to the lowest level since March 2009, during the “Great Recession.” Separately, the S&P Case/Shiller index of home prices in 20 major U.S. cities fell and missed estimates in August which reiterates how weak the housing market is right now.
Stocks bounced off support (SPX 1230) on Wednesday after Germany passed a plan to expand the EU bailout measure. In the U.S., durable goods topped estimates which bodes well for the economic recovery. Durable goods rose +1.7% in September which was the largest increase in six months and topped the +0.4% estimate. In other news, mortgage applications rose last week and recovered some of the losses from the previous week as demand for purchases and refinancing rose.

Thursday & Friday’s Action: Risk Assets Surge on EU Deal!

Stocks soared on Thursday after private lenders agreed to a 50% haircut on their Greek debt and EU leaders agreed to leverage the hell out of their EU bailout plan. French President Nicolas Sarkozy said the EFSF (European bailout fund) will be leveraged 4-to-5 times in an attempt to curb their excessive debt woes. Sarkozy also spoke with Chinese leader Hu Jintao who offered to help Europe from imploding. Economic data in the U.S. was positive, the Labor Department said weekly jobless claims came in at 402,000 which barely beat expectations. More importantly, GDP jumped +2.5% last quarter which matched estimates and bodes well for the economic recovery. Stocks were relatively quiet on Friday after consumer spending rose but incomes remained lackluster.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and broke above the mid-point/resistance of their 6-week bullish double bottom base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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27 Oct
Daily Market Commentary

Markets Soar on EU Deal!

Thursday, October 27, 2011
Stock Market Commentary:

Stocks vaulted on Thursday after successfully testing support (1230) earlier in the week. The big catalyst came from Europe after private investors agreed to slash Greek’s debt by 50%. All the major averages are now positive for the year which is a very healthy for this rally. It is also important to note that the Dow Jones Industrial Average is on track for its single largest monthly gain in history! Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines.

Greece Takes 50% Haircut, 200 DMA line is Breached, & All Major U.S. Averages are up on the year!

Stocks soared on Thursday after private lenders agreed to a 50% haircut on their Greek debt and EU leaders agreed to leverage the hell out of their EU bailout plan. French President Nicolas Sarkozy said the EFSF (European bailout fund) will be leveraged 4-to-5 times in an attempt to curb their excessive debt woes. Sarkozy also spoke with Chinese leader Hu Jintao who offered to help Europe from imploding. Economic data in the U.S. was positive, the Labor Department said weekly jobless claims came in at 402,000 which barely beat expectations. More importantly, GDP jumped +2.5% last quarter which matched estimates and bodes well for the economic recovery.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and broke above the mid-point/resistance of their 6-week bullish double bottom base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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26 Oct
Daily Market Commentary

Stocks Rally As Germany Boosts EFSF Bailout

Wednesday, October 26, 2011
Stock Market Commentary:

Stocks rallied on Wednesday (bouncing off support -shown above) after Germany passed a bill to expand the EU bailout plan. Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines. The next important area of resistance is their September highs and then their 200 DMA lines. We would be remiss not to note that several key risk assets (multiple stock markets around the world, Copper, Crude Oil, etc.) officially entered bear market territory over the in recent months which bodes poorly for U.S. stocks and the global economy. However, it is “encouraging” to see U.S. stocks outperform these markets which is a sign of strength.

Earnings, Economic Data & Europe Drag Stocks Lower

Stocks opened higher Wednesday after Germany passed a plan to expand the EU bailout measure. In the U.S., durable goods topped estimates which bodes well for the economic recovery. Durable goods rose +1.7% in September which was the largest increase in six months and topped the +0.4% estimate. In other news, mortgage applications rose last week and recovered some of the losses from the previous week as demand for purchases and refinancing rose.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and broke above the mid-point/resistance of their 6-week bullish double bottom base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is its longer term 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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25 Oct
Daily Market Commentary

Stocks Turn Negative For The Week

Tuesday, October 25, 2011
Stock Market Commentary:

Stocks fell on Tuesday and turned negative for the week as investors digested the latest round of lackluster earnings and EU leaders kicked the can down the road- yet again. Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines. The next important area of resistance is their September highs and then their 200 DMA lines. We would be remiss not to note that several key risk assets (multiple stock markets around the world, Copper, Crude Oil, etc.) officially entered bear market territory over the in recent months which bodes poorly for U.S. stocks and the global economy. However, it is “encouraging” to see U.S. stocks outperform these markets which is a sign of strength.

Earnings, Economic Data & Europe Drag Stocks Lower

Stocks fell on Tuesday after rumors spread that European leaders will not resolve their onerous debt concerns when they meet on Wednesday. Since 2008, we have been telling clients that is impossible to solve a debt crisis with more debt! However, the cognoscenti feel otherwise. Stocks were also under pressure after several closely followed companies missed Q3 numbers: UPS, Netflix (NFLX), and Texas Instruments (TXN), to name a few.
The news from the economic front was less than stellar. Consumer confidence in the U.S. unexpectedly fell in October to the lowest level since March 2009, during the “Great Recession.” Separately, the S&P Case/Shiller index of home prices in 20 major U.S. cities fell and missed estimates in August which reiterates how weak the housing market is right now.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and broke above resistance of their 6-week base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is its longer term 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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25 Oct
Blog

7 Things That Concern Me About This Rally- Right Now

1. We have come too far too fast. How many times do you remember seeing the SP500 soar 17% in 3 weeks (or know of it ever happening in history)? And the kicker- the move has been on below average volume! Moreover, if the market is to get back to 1370 (2011 highs) by year end- it will have to move 28% from Oct 4- Dec 31. Possible, but probable?
2. Nothing has changed- the “fundamental” mess that sent a slew of risk assets lower over the summer (i.e. US and EU debt issues, anemic economic growth, etc.)- are still unresolved… Everyone (right now) is focused on Greece. However, even if Greece is “handled” it does not address the broader issue: The other PIIGS are broke!

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3. Most bear markets last 18-24 months- not less than 1 day. The S&P 500 officially hit bear market territory on 10/4 (down 20% from its 2011 high) and that lasted for a tenth of a second because that was the exact low for the year (so far). Normally, the 18-24 months allow stocks to reset their bases and paves the way for new leadership to emerge.
4. I find it very interesting to see the stock market “bottom” (at least for now) on 10/4 because that is the EXACT day the Fed started operation “twist.” Coincidence? You make the call. Remember QE 2 in 2010 led to a nice long rally. Will twist do the same? No one knows just yet.
5. I find it VERY Interesting- (for what it is worth) to see the low on 10/4 undercut support by ~25 points (support was 1100 and the low was 1074.77) and then Monday’s -10.24.11- high was ~25 points above resistance (resistance was 1230 and Monday’s high was 1256.55)
6. Remember, that some of the market’s largest moves (both up and down) occur during bear markets. Since the beginning of August, volatility has surged- in both directions!
7. Leadership has rotated. Here’s a quick glance at some of the stocks we have given out to our clients in recent weeks:
UA – fresh heavy volume breakout Tuesday (now pulling back)
CMG
MCD
AAPL
GOOG
INTC
ISRG
WFM
WMT
NUAN
Conclusion:
All this is just noise. Remember, markets climb a wall of worry. As long as the S&P 500 trades above its 50 DMA line, it deserves the bullish benefit of the doubt!
Trade wisely,
Adam Sarhan
 



24 Oct
Uncategorized

Resistance Should Become Support

Monday, October 24, 2011
Stock Market Commentary:

Stocks rallied on Monday as investors digested the latest round of earnings and M&A news. Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines. The next important area of resistance is their September highs and then their 200 DMA lines. We would be remiss not to note that several key risk assets (multiple stock markets around the world, Copper, Crude Oil, etc.) officially entered bear market territory over the in recent months which bodes poorly for U.S. stocks and the global economy. However, it is “encouraging” to see U.S. stocks outperform these markets which is a sign of strength.
Another Lackluster EU Meeting, Earnings Top Estimates & M&A News Lifts Stocks!
Over the weekend, EU leaders kicked the can down the road and reschedule yet another meeting on Wednesday to tackle their onerous debt levels. Elsewhere, shares of Catepillar Inc. (CAT) gapped up after topping Q3 estimates and raised their 2012 forecasts. The news on the M&A front was healthy. Shares of RightNow Technologies (RNOW) and Healthspring Inc. (HS) gapped up after agreeing to be acquired on Monday.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and broke above resistance of their 6-week base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is its longer term 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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21 Oct
Daily Market Commentary

Resistance is Broken!

Friday, October 21, 2011
Stock Market Commentary:

Stocks ended the third week of October mixed with the DJIA & SPX closing higher but the tech-heavy Nasdaq composite closing slightly lower due to Apple’s EPS miss. Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines. The next important area of resistance is their September highs and then their 200 DMA lines. We would be remiss not to note that several key risk assets (multiple stock markets around the world, Copper, Crude Oil, etc.) officially entered bear market territory over the in recent months which bodes poorly for U.S. stocks and the global economy. However, it is “encouraging” to see U.S. stocks outperform these markets which is a sign of strength.

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Monday-Wednesday’s Action: Stocks Score FTD!

Over the weekend, the G-20 did little more than pay lip service to the ongoing debt woes in Europe. On Monday, stocks were smacked after Germany, Europe’s largest economy, dampened expectations that EU leaders will reach a deal in the near future. Before Monday’s open, Citigroup (C) beat estimates but WellsFargo (WFC) missed estimates. News on the economic front was negative. The New York Fed’s Empire State index was little changed this month to negative -8.48 from negative -8.82 in September. However, this missed the Street’s estimates for a reading of negative -4.  Separately, industrial production rose +0.2% in September which matched estimates.
Stocks scored a proper FTD on Tuesday after rumor spread that Europe’s bailout plan would be passed, sooner rather than later. Earnings were not ideal, Johnson & Johnson (JNJ), Bank of America (BAC), Goldman Sachs (GS) and Apple Inc. (AAPL) all missed estimates. The news from the economic front was not ideal. The U.S. producer price index (PPI), which is used to measure inflation and has been very tame of late, topped estimates in September and jumped to the fastest increase in five months. The Labor Department said wholesale prices rose +0.8% which easily topped the +0.2% reading expected on Wall Street. S&P, one of the three popular rating agencies, put France on a negative watch, downgraded Spain’s debt, and the latest data from China indicated their economy continued to slow.
Stocks were relatively quiet on Wednesday as investors digested a slew of earnings and economic data. The latest round of earnings were mixed which has yet to give investors a clear “tell” on how Q3 earnings season will play out.

Thursday & Friday – Stocks Rally Ahead of E.U. Meeting:

The latest round of earnings data was mixed which largely echoed what we have seen this week from corporate America. Greek citizens rioted for the second day as their government voted on the latest round of austerity measures. A large meeting is planned in Europe this weekend to help resolve their ongoing debt woes. In the U.S., the economic data was mixed. The Labor Department said weekly jobless claims  slid by -6,000 to 403,000 which topped the decline of -4,000 expected on Wall Street. The Philly Fed index, which measures manufacturing activity in the Mid-Atlantic region, rose to +9.7 in October which is the highest reading since April and topped the +9.0 forecast.  Meanwhile, leading indicators rose +0.2% last month for its fifth consecutive gain but fell short of the +0.3% forecast.  Finally, the National Association of Realtors said existing home sales slid -3% to an annual rate of +4.91 million last month which also topped estimates. Stocks soared on Friday as optimism spread that E.U. leaders will make some significant progress during their meeting this weekend to tackle their mounting debt woes.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and broke above resistance of their 6-week base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is its longer term 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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20 Oct
Media Quotes

Reuters Quote: METALS-Copper crumbles 7% as double-dip fears bite

Thu Oct 20, 2011 2:55pm EDT
* Copper leads commods rout with 6.6 pct decline
* Zinc, lead, aluminum hit lowest in more than one year
* EU summit will not reach EFSF decision – sources
* Coming up: Weekly Shanghai metals inventory data Fri.
By Chris Kelly and Silvia Antonioli
NEW YORK/LONDON, Oct 20 (Reuters) – Copper prices tumbled nearly 7 percent on Thursday, the biggest one-day collapse in four weeks, on fears of a double-dip recession and growing doubts that Europe will get a handle on its debt crisis. Metals, often seen as a proxy for underlying economic conditions due to their wide use in industry, were hit hard by the specter of a global slowdown with lead, zinc and aluminum all hitting their lowest level in more than a year.
Taking its directional cues from Asia, where prices fell the 6-cent daily limit, copper’s decline far outstripped losses in other commodities, bucking its bullish supply situation, where the world’s second-largest copper mine is running at about two-thirds of its capacity after a month-long strike. Other risky assets like oil and agricultural commodities went down between one and two percent.
    “Copper tends to lead other markets. If copper prices are starting to begin another leg lower now — nearly 10 percent in just two days — that’s not just a blip on the radar … it is indicative of investors’ concern about the global economy,” said Adam Sarhan, chief executive of New York-based Sarhan Capital. 
“Copper right now is signaling that the global economy might be in for a double dip.” 
London Metal Exchange (LME) benchmark copper dived $475 or 6.6 percent to finish at $6,735 per tonne, its biggest daily decline since Sept 22, when it plunged over 7.5 percent.
In New York, the key December COMEX contract dropped 20.05 cents or 6.2 percent to settle at $3.0575, close to the bottom end of its $3.2350 to $3.0310 session range. Volumes perked up Thursday as the selling intensified. Close to 64,000 lots traded in New York, nearly 12 percent above the 30-day average, according to
Thomson Reuters preliminary data. Copper extended a reversal from Monday’s three-week high near $3.50 in New York and $7,660 in London, leaving both markets vulnerable for a retest of their 2011 lows, at $2.99 and $6,635, respectively.
“People are saying these metals are not trading on the fundamentals, they are trading on the macro, but there is nothing more fundamental in the worldthan the economic outlook,” analyst Stephen Briggs of BNP Paribas said. “The bank’s (BNP Paribas) view is that Europe will muddle through and find a solution, but clearly the market is worried that that might not be the case,” he added.
A high-profile EU summit will go ahead on Sunday as planned, according to sources in Germany’s ruling coalition, but it will not reach a decision on leveraging the euro zone rescue fund, the European Financial Stability Facility(EFSF). Sentiment briefly improved after the Federal Reserve Bank of Philadelphia said its index of business conditions in the U.S. Mid-Atlantic region rose in
October. WARY CUSTOMERS
BHP Billiton  , the world’s largest miner, in the face of short-term market volatility warned on Thursday of increasingly wary customers, although it said its order books were full due to resilient Chinese demand.”We are also seeing that customers are looking closely at their inventory levels as they operate their businesses, cognizant of the potential need totailor their plans if the global economic uncertainty continues,”  Chief Executive Marius Kloppers said in London. Customer buying interest remained strong, he said, fueled by China, where domestic stockpiles have been “substantially liquidated.”China is the world’s largest copper consumer, accounting for roughly 40 percent of global demand of refined metal. Monthly imports of copper products rose to a 16-month high in September.
 
Metal Prices at 1816 GMT
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal            Last      Change  Pct Move   End 2010   Ytd Pct
move
COMEX Cu       306.35      -19.45     -5.97     444.70    -31.11
LME Alum      2085.00      -97.00     -4.45    2470.00    -15.59
LME Cu        6730.00     -480.00     -6.66    9600.00    -29.90
LME Lead      1789.00      -81.00     -4.33    2550.00    -29.84
LME Nickel   18000.00     -800.00     -4.26   24750.00    -27.27
LME Tin      21200.00     -725.00     -3.31   26900.00    -21.19
LME Zinc      1740.00      -98.00     -5.33    2454.00    -29.10
SHFE Alu     16040.00     -345.00     -2.11   16840.00     -4.75
SHFE Cu*     50950.00    -2940.00     -5.46   71850.00    -29.09
SHFE Zin     13850.00     -740.00     -5.07   19475.00    -28.88
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
 
http://www.reuters.com/article/2011/10/20/markets-metals-idUSL5E7LK2EE20111020

20 Oct
Daily Market Commentary

Stocks Wait For E.U. Meeting

Thursday, October 20, 2011
Stock Market Commentary:

Stocks were relatively quiet on Thursday as investors digested the latest round of earnings and economic data. Stocks confirmed their latest rally attempt on Tuesday day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can proceed with caution as long as the major averages remain above their 50 DMA lines. The next important area of resistance is their September highs and then their 200 DMA lines. We would be remiss not to note that several key risk assets (multiple stock markets around the world, Copper, Crude Oil, etc.) officially entered bear market territory over the in recent months which bodes poorly for U.S. stocks and the global economy.

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Earnings Mixed, Riots In Athens, & Economic Data Does Not Disappoint:

The latest round of earnings data was mixed which largely echoed what we have seen this week from corporate America. Greek citizens rioted for the second day as their government votes on the latest round of austerity measures. A large meeting is planned in Europe this weekend to help resolve their ongoing debt woes. In the U.S., the economic data was mixed. The Labor Department said weekly jobless claims  slid by -6,000 to 403,000 which topped the decline of -4,000 expected on Wall Street. The Philly Fed index, which measures manufacturing activity in the Mid-Atlantic region, rose to +9.7 in October which is the highest reading since April and topped the +9.0 forecast.  Meanwhile, leading indicators rose +0.2% last month for its fifth consecutive gain but fell short of the +0.3% forecast.  Finally, the National Association of Realtors said existing home sales slid -3% to an annual rate of +4.91 million last month which also topped estimates.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and are flirting with resistance of their current 2.5 month base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is September’s highs and then the 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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On Tap This Week:
FRIDAY: Fed’s Kocherlakota speaks, 2011 Dodd-Frank Rulemaking Deadline; Earnings from GE, McDonald’s, Verizon, Honeywell and Schlumberger
Source: CNBC.com

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