Wednesday, January 13, 2010

Market Commentary:

After a tough start to the week, stocks closed higher on Wednesday as earnings optimism and a slew of analyst upgrades helped offset the pessimism. Volume, an important indicator of institutional sponsorship, was reported lower than Tuesday’s totals on the NYSE and on the Nasdaq exchange, which suggested large institutions were aggressively buying stocks. Advancers led decliners by nearly a 3-to-1 ratio on the NYSE and by a 2-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, higher than the total of 12 issues that appeared on the prior session. New 52-week highs still solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Bankers On Capital Hill; The Financial Crisis Inquiry Commission Begins Investigating (FCIC)

Stocks traded between positive and negative territory on Wednesday before the bulls showed up and sent stocks higher in the afternoon. Several of Wall Street’s top bankers spent the morning testifying on Capital Hill about the 2007-2009 financial crisis. The bankers, whose companies collectively received more than $100 billion in government aid, spent hours explaining what happened during the crisis. The Financial Crisis Inquiry Commission was formed to examine and learn what went wrong during that period.

Google May Leave China:

In other news, Google Inc. (GOOG) gapped down after the tech giant said it may leave China, the world’s largest Internet market, on censorship concerns. Shares of Baidu Inc. (BIDU) gapped up over $50 and came within a few points of hitting a fresh 52-week high on the news. Needless to say, it will be very interesting to see how this plays out.

Fed Beige Book:

At 2:00PM EST, the Federal Reserve released its Beige Book which showed the economy continues to recover in many regions in the country. The Fed said, “while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report.” The Beige Book collects information from 12 District Fed Banks and will be used at the January 26-27 FOMC meeting.

Market Action- Uptrend Intact:

Stocks slid on Monday and Tuesday but the bulls showed up on Wednesday and quelled the bearish pressure. However, several leading stocks sold off hard, and negated their latest breakouts earlier in the week, which reiterates the importance of remaining selective as investors attempt to figure out how earnings season will unfold. It is important to note that the current 45-week 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.
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