Stocks and a slew of other “riskon” assets bounced from deeply oversold levels as hope spread that another round of global monetary easing will curb the economic slowdown across the globe. In early May, all the major averages sliced below their respective 50 DMA lines which prompted us to label this market “in a correction.” For the past few weeks, we have written about the importance of being defensive especially because the action in the major averages and a slew of leading stocks deteriorated. After the sharp fall, the bulls showed up and are doing their best to defend the longer term 200 DMA lines for the major averages. If that level is “broken” on a closing basis- then we have to expect another leg lower to begin.
Stocks rallied on Monday erasing earlier losses and marked Day 1 of a new rally attempt. Stocks looked passed a lackluster non-manufacturing PMI reading from China and were hopeful that the EU crisis was not deteriorating further. The CRB Commodity Index managed to snap a four day losing streak which also helped stocks rally. The euro, which is a great barometer for “riskon” assets, also rallied from deeply oversold levels which paved the way for a “riskon” day.
Stocks rallied on Tuesday after the latest round of economic data was mixed. European retail sales slid but non-manufacturing PMI improved marginally. Finance ministers from the G7 held an emergency teleconference but failed to come up with any ground breaking solutions. The latest ISM Services Index rose to 53.7 in May from 53.5 in April. Moody’s one of the popular rating agencies, slashed the ratings on several European banks.
Stocks extended their gains on Wednesday after the ECB held rates steady at 1% and optimism spread. The ECB held its key interest rate unchanged at 1% which matched expectations. ECB President Mario Draghi said the central bank will do its best to curb inflation but added that inflation pressures remain subdued. Draghi also said the ECB expects inflation should remain above 2% for the rest of 2012 and then fall to 1-2% in 2013.
Thursday & Friday’s Action- Stocks Slide As Enthusiasm Wanes:
Before Thursday’s open, China lowered their interest rates by 25 basis points to 6.31% to help boost their “sagging economy.” The PBC move was not expected and helped send a slew of risk assets higher. Janet Yellen, the vice chair of the Fed, gave a speech in Boston where she made a case for another round of monetary easing to protect and stimulate the US economy from the impact of the euro zone debt crisis. After the open, Bernanke testified before the Congressional Joint Economic Committee and reiterated his recent stance regarding continued “downside” risks to the economy and capital markets. In European news, Spain has not yet requested assistance from the ECB and has resisted being placed under international supervision. However, Reuters reported that both German and European Union officials are urgently searching for solutions to their onerous debt problems. Stocks sold off in the final hour after the U.S. Fed boosted capital requirements for several of the country’s largest banks. Stocks rallied on Friday as enthusiasm regarding the global economy improved.
Tuesday, February 2, 2010 Market Commentary: Stocks and commodities rallied as the dollar fell for a second consecutive day after healthy news from the ailing housing front was released and the Australian central bank unexpectedly left interest rates steady. Volume was heavier than the prior session on the NYSE and Nasdaq exchange which signaled large institutions were buying…
Thursday, March 11, 2010 Market Commentary: The major averages edged higher after China said inflation jumped last month and mixed economic data was released. Volume totals were reported lower than the prior session on both major exchanges. Advancers led decliners by a 23-to-15 ratio on the NYSE and by nearly a 15-to-11 margin on the Nasdaq exchange. There were 35 high-ranked companies from the CANSLIM.net Leaders List that made…
Friday, April 1, 2011 Stock Market Commentary: Stocks enjoyed their best quarterly advance since 1999 which bodes well for the current 2-year bull market. It was encouraging to see a slew of leading stocks and the benchmark S&P 500, Dow Jones Industrial Average, Nasdaq composite, and small cap Russell 2000 index all close and stay above…
Market Outlook- Market In A Confirmed Rally
From our point of view, the market is back in “rally-mode” as all the major averages continue to trade above their respective 50 DMA lines and recent chart highs. In addition, leading stocks have held up very well even as the major averages slid below their respective 50 DMA lines in mid-April which is another encouraging sign. If you are looking for specific help navigating this market, please contact us for more information.
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