Thursday, December 17, 2009

Market Commentary:

The NYSE indices suffered another distribution day after the U.S. dollar vaulted to a three-month high against the euro as concern spread that the Fed-induced rally will end in early 2010. Volume, an important indicator of institutional sponsorship, was reported mixed; higher than Wednesday’s totals on the NYSE, yet lower on the Nasdaq exchange. The lower volume on the Nasdaq helped that index avoid adding another distribution day to its count. Decliners led advancers by more than a 2-to-1 ratio on the NYSE and by nearly a 3-to-1 ratio on the Nasdaq exchange. There were 20 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, substantially down from the total of 53 issues that appeared on the prior session. New 52-week highs still outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data:

Before Thursday’s opening bell, the Labor Department said initial jobless claims rose slightly last week to 480,000 versus expectations for 465,000. The report missed estimates but continued the recent trend which points to a possible bottoming in the labor market. The four week average, which smooths out the data, suggests a mild improvement with a sixteenth consecutive decline, down 5,250 to the lowest level since September 2008. For those of you that do not know, this report shows how many people filed for unemployment insurance for the first time and is released every Thursday at 8:30AM EST. However, the report is counter intuitive, if the number increases each week then that suggests a deteriorating labor market because more people are filing for unemployment claims.
At 10:00 AM EST, the Conference Board released its index of leading economic indicators and the Philadelphia Fed released its index which measures general economic conditions in the region. The Conference Board’s index, which is used to forecast the following 3-6 months, rose by +0.9% in November which bodes well for the first half of 2010. The index measures ten economic indicators that usually “lead” the overall economy. Meanwhile, the Philadelphia Fed’s headline index rose more than 3.5 points to 20.4 which indicates healthy month-to-month acceleration in the region’s manufacturing sector. The report also contrasts the Empire State index which came in just above zero on Tuesday. The fact that the market sold off on the news suggests investors were not happy with the data.

Stronger Dollar Puts Pressure On Stocks:

The US dollar’s strength dominated the headlines on Thursday, and a slew of dollar denominated assets headed lower (mainly stocks and commodities). The major averages continued pulling back from important resistance levels and appear to be headed for a test of support levels which are just above their respective 50-day moving average lines. Until either support or resistance is taken out, expect this bracketed (sideways) action to continue.