Stocks Rally On Greek Optimism
Monday, September 26, 2011
Stock Market Commentary:
Stocks rallied across the globe after the worst weekly decline for the Dow Jones Industrial Average since 2008 on optimism that EU leaders will help prevent a Greek default. Nearly every day since mid-August, we told you that the major averages were simply rallying (on light volume) towards resistance (50 DMA line) and unless they broke above resistance, the sideways/range bound action would continue. Now, the major averages are simply testing support and unless support is violated (SPX 1101-1123) then, by definition, we should expect this sideways action to continue.
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Stocks Rally On Greek Optimism & New U.S. Home Sales Plunge- Again:
Stocks rallied on Monday as optimism spread that European leaders will unite and save Greece from defaulting on its debt. Gold was smacked and sliced below the pscyhologically important 1600 level for the first time in over a month as the bears remain in control of this market in the short term.
In the U.S., new home sales remain on life support and at a nine-month low, at a 295,000 annual rate in August vs 302,000 in July and 303,000 in June. The report also showed that prices tanked -8.7% in August for both the median ($209,100) and the average ($246,000) new home around the country. This is just another dismal report for the ailing home sector.
Market Outlook- Rally Under Pressure:
The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when several distribution days emerge or August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.
