Daily Market Commentary

Greek Vote Yes!

Wednesday, June 29, 2011
Stock Market Commentary:

Stocks edged higher as investors digested the latest round of economic data and the Greek government voted “yes” to the much anticipated austerity measures. The major averages bounced nicely during the first half of this week but volume, an important indicator of institutional sponsorship, declined which is not ideal. Normally, one would like to see stocks rally on heavier volume and decline on lighter volume. However, the opposite has been true since the beginning of May. The major averages remain trapped in the middle of their multi-week sideways trading range with support near the 200DMA and resistance near the recent chart lows (SPX 1294) and then the 50DMA.

Greek Vote, Pending Home Sales

Before Wednesday’s open, the Greek Parliament passed a key vote which allows the country to begin their much needed austerity measures. So-called risk assets (stocks, currencies, commodities, etc.) were volatile right after the announcement but edged higher as investors digested the news. Part 2 of the vote is scheduled for Thursday and it will be interesting to see how the markets react to that news. Elsewhere, the National Association of Realtors said pending home sales vaulted +8.2% from April which easily topped the Street’s estimate for a +3% gain. This was the latest in a series of stronger-than-expected economic reports from the ailing housing market and bodes well, by extension, for the broader economy.
Market Outlook- Market In A Correction:
The market is back in a correction after another failed follow-through day on Tuesday, June 21, 2011. Now that we are back in a correction, defense remains the best offense. The next level of support for the major averages is their respective 200 DMA lines and then their March lows. The next level of resistance for the major averages is their respective 50 DMA lines. Trade accordingly.
For those of you that are interested, the S&P 500 hit a new 2011 high on May 2, 2011. Two days later, on Wednesday, May 4, 2011, we turned cautious and said “The Rally Was Under Pressure” (read here). Then on Monday, 5.23.11, we changed our outlook to “Market In A Correction” (read here). On Monday, June 6, 2011 we pointed out that the S&P 500 violated its 9-month upward trendline (read here) and reiterated our cautious stance. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. Two days later, on Thursday, June 23, 2011, our outlook changed to “Market In A Correction”after the market sold off hard on renewed economic woes. If you are looking for specific help navigating this market, please contact us for more information.

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