Daily Market Commentary

Bears Are Getting Stronger!

Wednesday, April 13, 2011
Stock Market Commentary:

Stocks opened higher after JP Morgan Chase (JPM) released a stronger-than-expected Q1 earnings report. However, for the second consecutive day, the bears showed up and quelled the bulls’ efforts. From our vantage point, the current rally is under pressure as all the major averages are flirting with their respective 50 DMA lines (NDX already violated its 50 DMA lines). The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. However, the correction was short lived when a new rally was confirmed on Thursday March 24, 2011′s healthy action. Since then, the action remains healthy which suggests the bulls are back in control of this market.

Earnings, Retail Sales, and Beige Book Weigh On Stocks:

Before Wednesday’s opening bell, JPM reported stronger than expected Q1 results which helped the market open higher. However, earnings fell short of the so-called whisper number which dragged shares lower by the end of the day. On the economic front, retail sales rose nicely in March due to higher gasoline prices. As expected, higher energy prices hurt auto sales. However, overall retail sales rose +0.4% in March, following a revised +1.1% gain in February. It should be noted that the March figure fell short of the Street’s estimate for a +0.5% gain. President Obama gave a speech which outlined his plan to tackle the country’s onerous debt levels. Elsewhere, the Fed’s Beige Book was released which showed moderate economic growth in much of the country.

Market Action- Rally Under Pressure

The current rally which began with the Thursday, March 24, 2011 FTD is now under pressure as the Nasdaq 100 closed below its respective 50 DMA line for the fourth straight day. Remaining objective, it is bullish to see the other popular averages all trading slightly above their respective 50 DMA lines. However, if that important level is breached, then lower, not higher prices, likely lie ahead. If you are looking for specific help navigating this market, please contact us for more information.