Stocks End Mixed As Dollar Edges Higher

Wednesday, June 16, 2010
Market Commentary:

The major averages traded between positive and negative territory after BP Plc’s (BP) said it plans to create a $20 billion fund to pay damages from the oil spill and investors digested the latest round of lukewarm economic data. Volume totals were reported lower on the Nasdaq and on the NYSE which signaled large institutions were not aggressively selling stocks. Breadth was negative as decliners led advancers by an 11-to-8 ratio on the NYSE and nearly a 4-to-3 ratio on the Nasdaq exchange. There were 35 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 37 issues that appeared on the prior session.  New 52-week highs outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange.

Investors Digest A Slew Of Economic Data:

Before Wednesday’s opening bell, the Commerce Department said housing starts slid -10%, the largest decline since March 2009, to a 593,000 annual rate. This was was lower from a revised 659,000 pace in April and trailed analyst estimates. Meanwhile, building permits, a sign of future construction, unexpectedly fell to a one-year low and single-family starts suffered the largest decline since 1991. The weaker than expected housing data coupled with the sharp two month sell-off in many housing stocks rises the likelihood of a double dip decline in the ailing housing market. 
Separately, Fannie Mae (FNM) and Freddie Mac (FRE) plunged after their regulator told the two mortgage-finance companies to delist their stock from the New York Stock Exchange. Finally, the produce price index (PPI) was released on Wednesday and did little to excite investors.

Market Action- Confirmed Rally:

The major averages confirmed their latest rally attempt on Tuesday, June 15, 2010 when they produced a sound follow-through day. Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. Technically, it was encouraging to also see the Dow Jones Industrial Average and the benchmark S&P 500 Index rally above their respective 200-day moving average (DMA) lines. Looking forward, the 200 DMA line should now act as support as this market continues advancing, while any reversal would be a worrisome sign.
Remember to remain very selective because all of the major averages are still trading below their downward sloping 50 DMA lines.  It was somewhat disconcerting to see volume remain light (below average) behind the confirming gains. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.
Are You Ready For This NEW Confirmed Rally?

Similar Posts

  • Day 1 Of A New Rally Attempt

    Looking at the market, Monday marked Day 1 of a new rally attempt which means that as long as Monday’s lows are not breached, the earliest a possible follow-through day could emerge will be this Thursday. However, if Monday’s lows are taken out, then the day count will be reset and the chances for a steeper correction increase markedly. It is also important to see how the major averages react to their respective 50 DMA lines. Until they all close above that important level then there will be a lot of technical damage on the chart. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data. Remember that the recent series of distribution days coupled with the deleterious action in the major averages suggests large institutions are aggressively selling stocks. Disciplined investors will now wait for a new follow-through day to be produced before resuming any buying efforts. Until then, patience is key.

  • Stocks Pullback After Monday's Strong Open

    It is encouraging to see the bulls show up in November 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. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. Put simply, stocks are strong. Trade accordingly. If you are looking for specific high ranked ideas, please contact us for more information.

  • Flurry of M&A News Lifts Stocks

    Tuesday, August 17, 2010
    Stock Market Commentary: The technical action in the major averages is not ideal. Currently, resistance for the Dow Jones Industrial Average is its 200 DMA line, while the Nasdaq composite faces resistance at its 50 DMA line. Meanwhile, the benchmark S&P 500 index managed to close above its 50 DMA line but still faces resistance near its 200 DMA line (1,116) and then its prior chart highs near 1,131. The action in leading stocks remains questionable at best which is another disconcerting sign. Tuesday’s action does not change our cautious outlook. Put simply, we can expect this sideways/choppy action to continue until the market breaks out above resistance or below support (recent chart lows). The first scenario will have bullish ramifications while the second will be clearly bearish. Trade accordingly.

Leave a Reply

Your email address will not be published. Required fields are marked *