Stocks Log Gains In February

SPX- Another Positive Month On Wall Street

SPX- Another Positive Month On Wall Street

Wednesday, February 29, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets rallied in February which helped Wall Street enjoy another positive month. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. Since then, stocks have been enjoying a very strong uptrend. The benchmark S&P 500 jumped above its 2011 high and hit the highest level since 2008! The bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line. Leadership continues to improve which is another healthy sign.

ECB’s LTRO 2 and Q4 2011 GDP Top Estimates:

Stocks opened higher on Wednesday after the Q4 GDP and the ECB’s second LTRO program topped estimates. 800 European banks borrowed 529.5 billion euros ($713 billion) which topped the Street’s estimate of 500 billion euros.  In the U.S., the latest Q4 GDP estimate rose to 3% from the initial estimate of 2.8%. This was the largest gain since the second quarter of 2010 and beat Q3’s 1.8% reading. Bernanke testified on Capital Hill and largely reiterated his recent stance regarding the ongoing economic recovery (with downside risk) and inflation remains in largely inline with his forecasts. Elsewhere, gold and silver both got smacked which bodes poorly for other risk-on assets.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. At this point, all this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought so trade accordingly. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
 

Adam Sarhan Reuters Quote: Gold

Reuters

Reuters


By Frank Tang and Jan Harvey
NEW YORK/LONDON | Mon Feb 27, 2012 3:48pm EST
(Reuters) – Gold prices eased on Monday, as a weaker euro and oil’s retreat halted the metal’s attempt to test technical resistance at above $1,800 an ounce following last week’s sharp rally.
Bullion was pressured by lingering economic uncertainty after leading economies told Europe over the weekend it must put up extra money to fight its debt crisis if it wants more help from the rest of the world.
The metal briefly rose in a tight range after data showed euro-zone money supply grew 2.5 percent in January on an annual basis. The metal has risen 13 percent year-to-date on expectations that monetary policy will remain loose in key economies.
“The gold market may be straddled between tame physical demand on the one hand and strong currency and investor risk-related buying on the other,” said James Steel, chief commodity analyst at HSBC.
“Ultimately a bull market needs both in order to sustain a long-term rally,” Steel said.
Spot gold edged down 0.2 percent at $1,769.40 an ounce by 3:06 p.m. EST (2006 GMT). Bullion rose 3 percent last week for its largest weekly rise in four weeks.
U.S. gold futures for April delivery settled down $1.50 an ounce at $1,774.90, as trading volume was about 70 percent below its 30-day average.
The precious metal has struggled to hold above $1,780 an ounce, an area of strong technical resistance near the highs in early December. Gold retreated after briefly breaking above that level last week.
Adam Sarhan, CEO of Sarhan Financial, said a new and definitive longer-term technical buy signal will be triggered if gold breaks above $1,810 an ounce.
On Monday, it remained under some pressure from losses in other assets including the euro and crude oil, as investors worried about oil’s rally this month would start to hurt global growth.
GOLD-EURO LINK UNCERTAIN
In recent months, better news on the euro zone debt crisis has benefited gold, as the metal tended to rise along with the euro on economic optimism.
However, analysts said the correlation between the two remains patchy.
UBS in a note that the easing of correlations between gold and the euro should help shield gold if a negative surprise emerges from the euro zone in the near term.
Gold’s initial losses fueled a demand recovery in major consumer India, a price-sensitive market, on Monday, dealers said.
Among other precious metals, silver was up 0.2 percent at $35.42 an ounce. Spot platinum was down 0.3 percent at $1,703.24 an ounce, while spot palladium was down 0.9 percent at $703.50 an ounce.
South Africa’s Impala Platinum (IMPJ.J) is to rehire thousands of miners sacked for an illegal strike that has halted production for more than a month at the world’s biggest platinum mine, a leading union said on Saturday.
The strike fueled a near 5 percent rally in platinum prices last week, taking them to their highest since September at $1,731.50.
(Editing by Marguerita Choy and Lisa Shumaker)
URL: http://www.reuters.com/article/2012/02/27/us-markets-precious-idUSTRE80T1QZ20120227

S&P 500 Jumps To Highest Level Since June 2008!

SPX Jumps To Its Highest Level Since June 2008!

SPX Jumps To Its Highest Level Since June 2008!

Tuesday, February 28, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets rallied after the latest Italian bond yields plunged. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. Since then, stocks have been enjoying a very strong uptrend. The benchmark S&P 500 jumped above its 2011 high and hit the highest level since 2008! The bulls remain in control as long as the benchmark S&P 500 trades above its 50 DMA line. Leadership continues to improve which is another healthy sign.

Italian Yields Fall, U.S. Economic Data Missed:

Stocks rallied on Tuesday after Italy sold a healthy amount of bonds at lower interest rates. U.S. economic data was mixed. It was discouraging to see that durable goods fell -4% in January 2012 which was the largest drop in three years. The S&P Case/Shiller index showed that home prices across much of the country fell -3.8% in Q4 2011 which brought home prices down to levels not seen since 2006. However, consumer confidence jumped to 70.8 from an upwardly revised 61.5 in the previous month. This easily topped the Street’s average estimate for a gain of 63.0. It is important to note that the consumer currently makes up 2/3 of the U.S. economy.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. At this point, all this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought so trade accordingly. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
 

Stocks Take A Breather After G20 Meeting

XHB- Old Chart Highs Become Support

XHB- Old Chart Highs Become Support

Monday, February 27, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets ended mixed after the G-20 concluded said that European countries should sort their finances out on their own. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line. Leadership continues to improve which is another healthy sign

G-20 Does Not Rescue Europe; Pending Home Sales Surge In The U.S.:

Over the weekend, the G-20 concluded their latest meeting in Mexico and told European leaders that they need to resolve their fiscal woes on their own. Initially, this put a little pressure on equities and other risk assets and added pressure on Germany, Europe’s largest economy, to save the so-called PIIGS. Euro zone countries are going to reassess the strength of their bailout fund in March. Until then, the ECB’s LTRO program appears to be picking up the slack. In the U.S., pending home sales surged +8.0% vs. January 2011 and hit a two-year high. Again, as we have said several times in this column, housing stocks appeared to have bottomed and look great here.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. All this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!

Another Positive Week On Wall Street!

SPX- Strong Uptrend Continues

SPX- Strong Uptrend Continues

Friday, February 24, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets ended higher during this shortened holiday week as investors digested a second Greek bailout and a slew of stronger than expected economic and earnings data from the U.S. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line. Leadership continues to improve which is another healthy sign

Monday-Wednesday’s Action:

The stock market in U.S. was closed on Monday in observance of the President’s Day holiday. However, U.S. futures, and oversea’s markets enjoyed nice gains on Monday on renewed optimism vis-a-vis the latest bailout for Greece. On Tuesday, the Dow Jones Industrial Average topped 13,000 for the first time since May 2008. The DJIA has been up every month since October and is currently enjoying one of its strongest rallies since the March 2009 low! Meanwhile, the tech-heavy Nasdaq composite has already taken out its 2007 high and is currently sitting at its highest level since December 2000! Make no mistake about it, the bulls are clearly in control of this market as the global economy continues to recover from the Great Recession in 2008 and 2009. In the short term, stocks are very extended to the upside and a 5-9% pullback would be considered “normal” and “healthy” for this very strong bull market. Until then, one would be wise to not fight this very strong tape!
Stocks opened lower on Wednesday after China said its manufacturing sector slid for the fourth consecutive month. The HSBC purchasing managers index (PMI) rose to a four month high at 49.7 but still remained below the critical boom/bust line of 50. The PMI is used as an early indicator for China’s industrial activity and was hurt due to sagging exports to Europe. Elsewhere, the European Central Bank said that it wants local governments to begin taking responsibility for shoring up their country’s finances.

Thursday & Friday’s Action: Stagflation in Europe Weighs On Markets, U.S. Economic Data Tops Estimates

Before Thursday’s open, a report was released that forecasts the 27-nations in the European Union, which are responsible for a fifth of the global economy, to experience stagflation in 2012. Stagflation is a situation in which one’s economy is stagnate, if not contracts, coupled with high unemployment and higher inflation. The report expects the euro-zone to fall into a recession in 2012 which would be the first time the EU was in a recession since the Great recession in 2009. Economic data in the U.S. continued to be positive. The Labor Department said weekly jobless claims were unchanged at 351,000 which beat the Street’s estimate for a slight gain to 354,000. Needless to say, this bodes well for both the U.S. and global economy. Stocks reacted favorably on Friday after U.S. consumer confidence easily topped estimates. Meanwhile, the Commerce Department said new home sales fell by -0.9% in January to a seasonally adjusted 321,000-unit annual rate. The report topped estimates for an annual rate of 315,000.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. All this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!

Adam Sarhan Reuters Quote: Copper

Reuters

Reuters


Tue Feb 21, 2012 3:17pm EST
* Copper rallies over 3 pct, breaks 200-day moving average
    * Market could rise to $3.9 per lb in short term – traders
    * Concerns about Chinese demand remain

    By Josephine Mason and Harpreet Bhal
    NEW YORK/LONDON, Feb 21 (Reuters) – Copper prices rallied more than 3 percent on Tuesday, breaking through key
resistance and notching their largest daily gain since November, after Greece secured a rescue package from euro-zone finance ministers to avert an imminent default.
    
Breaching the 200-day moving average could help copper hold onto recent gains even amid continued concerns about Chinese demand and the battered euro-zone economy, traders said.
The red metal outperformed the precious metals and energy markets as well as the forex and equity markets, even after the Dow briefly topped 13,000 for the first time since May 2008.
Three-month copper on the London Metal Exchange (LME) ended at $8,449 a tonne, up more than 2 percent from Monday’s close of $8,235.50 and well above its 200-day moving average level of $8,399.05 per tonne.
The New York market built on momentum from Asia and Europe to end a six-day losing streak, as trading resumed following the long holiday weekend in the United States for President’s Day.

The key COMEX March contract notched up its largest daily percentage gain since the end of November to rise 12 cents
or 3.5 percent to settle at $3.8365 per lb. It hit an intraday high above $3.84 per lb just before 11:30a.m. (EST), piercing its 200-day moving average at $3.8327 per lb.

Prices are still shy of the five-month high of $3.9895 hit on Feb. 9, but are up some 12 percent year-to-date and prices
now stand a chance of continuing to rise before hitting the next resistance level around $3.9, predicted Frank McGhee, head metals trader at Integrated Brokerage Services LLC.

The May contract also breached its 200-day moving average at $3.7916 per lb to settle at $3.8665 per lb, up from $3.749 on Friday.

“The key now is to see if copper can stay above its 200 DMA line or if it is just a short-term fake out … For months, the 200 DMA line has served as resistance. The question now is, will the 200 DMA line become support?” said Adam Sarhan, CEO of Sarhan Capital.
In the immediate term, the market may take a breather after the run-up since the start of the year on the back of short
covering by hedge funds, according to traders who point to the rise in Comex speculative net long positions to their highest
levels since August and the surge in open interest to near record highs. [ID: nL2E8DHAW8]

While market participants say the buying has not been overdone, they will be watching the relative strength index
(RSI), which rose to 54 on Tuesday from 45 on Friday. An increase to above 70 would indicate an overbought market.
NERVOUS MARKET
Traders are also nervous about the strength of underlying demand, particularly amid concerns about slackening demand in
China, the world’s largest copper consumer. “Our most recent interactions with investors suggest that confidence remains fragile with euro-zone debt issues still a key concern, while worries about the short-term slowdown in China turning into a hard landing have rapidly escalated,” said Wiktor Bielski, head of commodities research at VTB Capital.

China’s recent announcement of a cut in the amount of cash that banks must hold is expected to boost lending capacity by
more than $50 billion and may help spark domestic metals demand. But stocks in Shanghai warehouses last week hit their
highest levels in nearly a decade and analysts have warned that the country’s imports are likely to remain week until March even after the end of Lunar New Year holiday which traditionally marks a resumption of buying.
        
EUPHORIA
Tuesday’s rally was sparked by news of an agreement on the Greek 130 billion euro ($172 billion) bailout programme, which, while long expected, is expected to help the troubled nation meet repayment needs next month.

The relief may only be shortlived though as the bailout deal may be eclipsed by concerns about more uphill battles for Europe to fix its economic problems. “This does address one of the core concerns that the market has had about the macroeconomy for this year, so although it doesn’t mean that we’re out of the woods yet, it does go some
way in addressing one of the market’s core concerns,” said Gayle Berry, an analyst at Barclays Capital.

“These are markets that are still very much categorised by a lack of conviction. In the short term what we’re going to see is
more erratic trading unless we get a series of events or data points that help to allay some of the concerns regarding
economic growth.”  In related news, the European Central Bank wants its second offer of cheap ultra-long funds next week to be its last, putting the onus back on governments to secure the euro zone’s longer-term future.
NO IMPACT FROM COLLAHUASI
On the supply side, news that the world’s No. 3 copper mine, Chile’s Collahuasi, halted all mining, plant and port operations
after a fatal accident on Monday had little effect on prices, traders said.

Operations are likely to start to normalize on Wednesday once authorities inspect the mine, a company source said.
 Zinc ended at $2,028 from $1,982 at the close on

Monday, lead closed at $2,117 from $2,051 and aluminium ended at $2,255 from $2,179.
Tin ended at $24,190 from $23,525 at Monday’s close and nickel closed at $20,230 from $19,750.
    
 Metal Prices at 1934 GMT
                                                                            
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       383.00       12.20     +3.29     343.60     11.47
  LME Alum      2254.00       75.00     +3.44    2020.00     11.58
  LME Cu        8449.00      213.50     +2.59    7600.00     11.17
  LME Lead      2117.00       66.00     +3.22    2035.00      4.03
  LME Nickel   20225.00      575.00     +2.93   18710.00      8.10
  LME Tin      24185.00      660.00     +2.81   19200.00     25.96
  LME Zinc      2027.00       45.00     +2.27    1845.00      9.86
  SHFE Alu     16180.00       45.00     +0.28   15845.00      2.11
  SHFE Cu*     60050.00      710.00     +1.20   55360.00      8.47
  SHFE Zin     15780.00      175.00     +1.12   14795.00      6.66
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07

 
URL: http://www.reuters.com/article/2012/02/21/markets-metals-idUSL5E8DL9A220120221

Stagflation Woes In Europe Weigh On Markets

Gold- Strong Breakout This Week

Gold- Strong Breakout This Week

Thursday, February 23, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets were mixed on Thursday after fear spread that European economies were headed for a double dip recession and stagflation. The primary catalysts for the risk on trade was the ECB relief long term loan package in December 2011 and the continued strength in the U.S. (and by extension the global) economy in recent weeks. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership continues to improve which is another healthy sign

Stagflation in Europe Weighs On Markets; U.S. Economic Data Tops Estimates

Before Thursday’s open, a report was released that forecasts the 27-nations in the European Union, which are responsible for a fifth of the global economy, to experience stagflation in 2012. Stagflation is a situation in which one’s economy is stagnate, if not contracts, coupled with high unemployment and higher inflation. The report expects the euro-zone to fall into a recession in 2012 which would be the first time the EU was in a recession since the Great recession in 2009. Economic data in the U.S. continued to be positive. The Labor Department said weekly jobless claims were unchanged at 351,000 which beat the Street’s estimate for a slight gain to 354,000. Needless to say, this bodes well for both the U.S. and global economy.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. All this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
 

Quiet Day On Wall Street

Housing ETF Pulling Back to 50 DMA Line

Housing ETF Pulling Back to 50 DMA Line

Wednesday, February 22, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets were flat to relatively lower on Wednesday after the enthusiasm wore off regarding the second bailout for Greece and China’s manufacturing sector contracted for the fourth consecutive month. The primary catalysts for the risk on trade was the ECB relief long term loan package in December 2011 and the continued strength in the U.S. (and by extension the global) economy in recent weeks. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line.

China’s Manufacturing Sector Improved But Still Contracting & Greece Woes Flare Up Again:

Stocks opened lower on Wednesday after China said its manufacturing sector slid for the fourth consecutive month. The HSBC purchasing managers index (PMI) rose to a four month high at 49.7 but still remained below the critical boom/bust line of 50. The PMI is used as an early indicator for China’s industrial activity and was hurt due to sagging exports to Europe. The European Central Bank said that it wants local governments to begin taking responsibility for shoring up their country’s finances.

U.S. Housing Market Remains In Flux: Housing Stocks Pulling Back To Consolidate Recent Move

In the U.S. the Mortgage Bankers Association said mortgage applications slid by a seasonally adjusted -4.5% in the week ending February 17, 2012. The report factors in both new purchases and refinances. Existing home sales swelled by +4.3% last month to a 4.570 million annual rate. The median home price tanked by -4.6% to $154,700. This decline suggests the housing market has yet to bottom and the decline is confirmed by a 4.0% decline for the average price to $201,200. Year-on-year rates also show a small single digit contraction.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
 

Stocks Edge Higher; Dow Breaks 13,000!

Dow Breaks 13K For 1st Time Since 2008

Dow Breaks 13K For 1st Time Since 2008

Tuesday, February 21, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets rallied on Monday and Tuesday after Greece finally agreed to the onerous terms of their latest bailout package. The primary catalyst for the risk on trade was continued strength from the U.S. (and by extension global) economy in recent weeks. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line.

Monday & Tuesday’s Action: Stocks Edge Higher; Dow Breaks 13,000!

The stock market in U.S. was closed on Monday in observance of the President’s Day holiday. However, U.S. futures, and oversea’s markets enjoyed nice gains on Monday on renewed optimism vis-a-vis the latest bailout for Greece. On Tuesday, the Dow Jones Industrial Average topped 13,000 for the first time since May 2008. The DJIA has been up every month since October and is currently enjoying one of its strongest rallies since the March 2009 low! Meanwhile, the tech-heavy Nasdaq composite has already taken out its 2007 high and is currently sitting at its highest level since December 2000! Make no mistake about it, the bulls are clearly in control of this market as the global economy continues to recovery from the Great Recession in 2008 and 2009. In the short term, stocks are very extended to the upside and a 5-9% pullback would be considered “normal” and “healthy” for this very strong bull market.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
 

Another Strong Week On Wall Street

SPX Flirting With 1356

SPX Flirting With 1356

Friday, February 17, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets enjoyed another strong week on as the risk on trade continued to dominate the investment landscape. The primary catalyst for the risk on trade was continued strength from the U.S. economy. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line.

Monday-Wednesday’s Action: Stocks Pause To Consolidate Recent Gains

Last Sunday, Greece’s parliament approved the closely contested austerity package for their second bailout from the EU/IMF. On Monday, Japan said its economy fell by -0.9% in 2011 which was their first full year contraction since the Great Recession in 2009! The country was hurt by a confluence of factors: waning growth from the developed world, floods in Thailand, a strong yen, and the Fukushima earthquake in March of 2011. Separately, Q4 earnings remain strong which has been a strong catalyst for the recent rally in risk assets. So far, 70% of the 352 S&P 500 companies that have reported earnings beat estimates so far which bodes well for the ongoing economic recovery. Before Tuesday’s open, investors digested the latest round of lackluster economic data. Retail sales grew by+0.4% last month which was half of the Street’s estimate for a gain of +0.8%. The Labor Department said import prices rose+0.3% while export prices rose +0.2% in January. Export prices matched estimates and topped December’s decline of -0.5%.
On Wednesday investors digested a slew of mostly stronger than expected economic data. The National Association of Home Builder’s said its monthly sentiment index rose 4 points to 29, which was its highest reading in four years. The Empire State survey topped estimates and rose to 19.53 in February which is another bullish feather in the economy’s cap. The minutes of the latest FOMC meeting were released and largely reiterated their recent publicly stated stance of cautious optimism. Finally, France and Germany’s gross domestic product (GDP) beat estimates. Germany’s GDP, Europe’s largest economy, fell by -0.2% in Q4 2011 which beat the -0.3% estimate. Meanwhile, France’s GDP, Europe’s second largest economy, rose by +0.2% which matched estimates.

Thursday & Friday’s Action: Healthy Economic Data Helps Stocks

Stocks were relatively quiet on Thursday even though the latest round of economic data was rather healthy in the U.S. The big news was that initial jobless claims fell sharply last week to 348,000, which was lower than the Street’s estimate for 365,000. The report also showed that continuing claims slid to 3.43 million from 3.53 million. A separate report showed that housing starts rose 699,000 last month which also topped the Street’s estimate for 671,000. Building permits rose slightly to an annualized rate of 676,000, which just beat the Street’s estimate for 675,000. The Philadelphia Fed Manufacturing Index rose more than expected to 10.2 in February. Finally, news on the inflation front was mild. The producer price index rose by +0.1% in January which was less than the average estimate for an increase of +0.3%. However, core prices jumped to +0.4% which was double the average estimate. Before Friday’s open, the Consumer price index rose +0.2% which missed the +0.3% expected on Wall Street. Higher gasoline prices were one of the strongest items to increase.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!