Stocks Smacked As EU Fears Spread

Byinfo@50park.com

Tuesday, November 1, 2011
Stock Market Commentary:

Stocks were off to a weak start in November after the Greek Prime Minsiter rattled confidence in the latest bailout plan by offering a referendum to vote on the proposed measures. From our point of view, this plan – to use leverage to add more debt to a debt crisis- is foolish at best and does not address the broader issues (i.e. the other PIIGS countries are broke). However, desperate times call for desperate measures. Our job is to trade on what we see happening, not on what we think will happen. We do this by gathering the facts, interpret how the markets react and trade accordingly, not stand in the way of them.  The benchmark S&P 500 (SPX) and Nasdaq composite are now negative for the year which is not ideal. Stocks confirmed their latest rally attempt on Tuesday (10.18.11) day 12 of their rally attempt when the SPX and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally and the current rally is under pressure. That said, one can err on the bullish side as long as the major averages remain above their 50 DMA lines.

Greek PM Shakes Confidence & U.S/Chinese MFG Data Not Thrilling:

Risk assets fell for a second straight day after the Greek PM asked for a referendum to support the latest bailout plan and the latest manufacturing data was lackluster in China and the U.S. The Institute for Supply Management (ISM) said its manufacturing index fell to 50.8 from 51.6 in the prior month but missed expectations of 52.0, according to a Reuters poll. The latest mfg data from China was less than thrilling.

Volatility Is Off The Charts- Caution is advised!

At this point, the market is in the process of pulling back. We wrote yesterday that, “They key is to ascertain the health and duration of the pullback to see if it is an orderly (i.e. normal) pullback or something more severe.” So far, the past two days have been anything but orderly. The VIX, which measures volatitlity, surged over 20% today and is back in the mid 30’s. The bulls are losing control since the SPX broke below 1230, effectively negating its latest breakout (from its double bottom base). The next level of support is the 50 DMA line (1190).

Market Outlook- Rally Under Pressure:

The current rally is under pressure due to the recent severe sell off that sent the SPX below 1230. This means that caution is king until the bulls regain control of this market. In addition, it is important to note that the bulls failed to send the major averages above their respective 200 DMA lines in late October. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

Stop Chasing Stocks,
Let Them Chase You!
Join FindLeadingStocks.com Today!

Similar Posts

  • Another Volatile Session On Wall St As Investors Digest Awful Housing Data & Latest Fed Meeting

    Byinfo@50park.com

    Technically, the fact that both the Dow Jones Industrial Average and the S&P 500 Index closed below their respective 200-day moving average (DMA) lines suggests the market may retest its recent lows. Looking forward, the 50 DMA line should now act as resistance and this month’s lows should act as support. Since the June 15, 2010 follow-through day (FTD), this column has steadily noted the importance of remaining very selective and disciplined because all of the major averages are still trading below their downward sloping 50-day moving average (DMA) lines. This week’s sell off simply confirms that view. Trade accordingly

  • Earnings Season Begins Stocks; Stocks Fall

    Byinfo@50park.com

    For the most part, the major averages and leading stocks are beginning to weaken as investors continue to digest the slew of economic and earnings data being released each day. Until a clear picture can be formed as to how companies fared last quarter one could easily expect to see more of this sideways action to continue. The market just completed its 45th week since the March lows and the rally remains intact as long as the major averages continue trading above their respective 50-day moving average (DMA) lines. Until those levels are breached, the bulls deserve the benefit of the doubt.

  • Stocks Slide On Possible Spain Downgrade

    Byinfo@50park.com

    Market Action- Market In Confirmed Rally Week 16
    It is encouraging to see the bulls show up 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. Put simply, stocks are strong. Trade accordingly. If you are looking for specific high ranked ideas, please contact us for more information.

  • Stocks Bounce Back As Dollar Falls

    Byinfo@50park.com

    Heretofore, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong but the market appears to be placing an interim top here as the major averages consolidate their recent move. The S&P 500 sliced below its two month upward trendline (shown above) which is not a healthy sign. The next level of support for the major averages is their September highs, then their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. We have enjoyed large gains since the September 1st FTD and for the first time, the tape is getting sloppy. Trade accordingly.

  • Weak Economic Data Drags Stocks Lower

    Byinfo@50park.com

    Monday marked Day 2 of a new rally attempt which means the earliest a possible follow-through day (FTD) could emerge will be Wednesday. However, if at anytime, Friday’s lows (Day 1) are breached then the day count will be reset. The technical action in the major averages has recently been weak while the latest round of economic data has provided a poor outlook for the market and the global recovery. Currently, resistance for the the major averages are their 50-day moving average (DMA) lines, then their longer-term 200 DMA lines while support remains July’s lows. It is also disconcerting to see weakness in the financial group. Meanwhile, the action in leading stocks and fact that some high-ranked leaders are breaking out of sound bases can be considered somewhat encouraging. Still there is importance in remaining cautious until the major averages are back in a confirmed uptrend. Put simply, we can expect this sideways/choppy action to continue until the market breaks out above resistance or below support. The first scenario will have bullish ramifications while the second will be clearly bearish. Trade accordingly.

  • Stocks Negatively Reverse At 50 DMA Line

    Byinfo@50park.com

    The technical action in the major averages continues to weaken. Currently, resistance for the the major averages are their 50 DMA lines, then their longer term 200 DMA lines. It is also disconcerting to see the action in several leading stocks remain questionable as evidenced by the dearth of high-ranked leaders breaking out of sound bases. Monday’s negatively reversal emphasizes the importance of remaining cautious until the rally is back in a confirmed uptrend. 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.