Friday, September 24, 2010
Stock Market Commentary:
Stocks enjoyed their fourth consecutive weekly gain as investors digested a slew of economic, earnings, and Fed data. Volume totals were reported higher on the NYSE and on the Nasdaq exchange compared to Thursday’s session which signaled large institutions were aggressively buying stocks. Market internals remained postive as advancers continue to trump decliners and new 52-week highs easily outnumber new 52-week lows on the NYSE and on the Nasdaq exchange.
Monday & Tuesday’s Action: Stocks Soar Then Fall After Fed Meeting:
Stocks soared on Monday after Lennar Corp.(LEN) reported solid earnings that topped estimates and International Business Machines Corp (IBM) announced a $1.7 billion takeover. Lennar’s solid earnings helped offset a weaker than expected report from the National Association of Home Builders that showed home builders’ confidence remained unchanged at 13. September’s reading matched an 18-year low.
On Tuesday, stocks opened higher after the Commerce Department said housing starts, which are registered at the start of construction of a new home, unexpectedly grew in August. The reading topped estimates and helped signal a possible bottom to this 4-year housing meltdown. However stocks negatively reversed after the Federal Reserve decided to hold rates steady near record lows and left the door open for further economic stimulus.
Wednesday-Friday’s Action: Stocks Bounces Smartly Off Support:
The major averages ended lower on Wednesday after a lousy report from the housing market was released and several large cap technology stocks got smacked. Overnight, gold surged to a fresh record high as the US Dollar fell for the third straight week . The Federal Housing Finance Agency (FHFA) released its House Price Index (HPI) which showed home prices continued to fall. The report fell -0.5% in July after falling a revised -1.2% in June. The decline was largely due to the now-expired tax credit. Meanwhile, tech giants, Adobe Systems Inc. (ADBE) and Microsoft Corp. (MSFT) gapped down on heavy volume which dragged other stocks lower.
On Thursday, stocks ended lower and the S&P 500 closed below support (formerly resistance) after weaker than expected economic news in Europe spooked investors. Overnight, stock futures tanked after European PMI slid to the worst level in 7-months which bodes poorly for the economic recovery. In the US, weekly jobless claims rose by 12,000 to +465,000 as the total number of people receiving unemployment insurance fell. After the open, existing home sales and leading economic indicators rose which helped stocks briefly turn positive before a late-day sell-off sent stocks lower into the close. Stocks soared again on Friday as the US dollar tanked and the market reacted favorably to durable goods, new home sales, and upbeat confidence from Germany.
Market Action- Confirmed Rally:
The action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong. Looking forward, the window is open for disciplined investors to carefully buy high-ranked stocks, while many so-called pundits are expecting that markets may consolidate following recent gains. It was encouraging to see the bulls show up and defend support (formerly resistance) this week. The next level of support for the major averages is their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. Trade accordingly.