Stocks Look Past Chinese Rate Hike & Disappointing Economic Data

Byinfo@50park.com

Wednesday, July 6, 2011
Stock Market Commentary:

Stocks closed higher on Wednesday after China raised rates to curb their red-hot economy and investors digested Portugal’s downgrade. It is encouraging to see that all the major averages remain above their respective 50 DMA lines which suggests the bulls remain in control of this market. The next level of resistance is their respective 2011 highs.

Chinese Rate Hike, ISM Service Index, & Healthy Market Action:

Before Wednesday’s open, China decided to raise their key interest rate by 25 basis points to curb inflation and their robust economy. Keep in mind that a slowdown in China curbs demend for so-called risk assets. Therefore, this put mild pressure on a stocks and a slew of commodities. At 10am EST, the ISM released its service index which fell short of the Street’s estimates and bodes poorly for the economic recovery. It is also important to note that the major averages are simply pulling back to consolidate last week’s strong move. A light volume pullback after a large move is normally a very healthy event. The key is to analyze the pullback and make sure the major averages and leading stocks do not violate key areas of support. So far the pullback has been very healthy and for the bulls sake, lets hope this healthy action continues.

Market Outlook- Market In A Confirmed Uptrend:

The last week of June’s strong action suggests the market is back in a confirmed rally. As our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the action remains bullish until the major averages and leading stocks violate their respective 50 DMA lines. Until then, the market deserves the bullish benefit of the doubt. Barring some unforeseen event, investors will likely be focusing on the jobs market this week and then turn their attention to Q2 earnings. If you are looking for specific help navigating this market, please contact us for more information.
 

Stock Market Research?

Global Macro Research?

Want To Follow Trends?

Learn How We Can Help You!

Similar Posts

  • Week-In-Review: Stocks Tank On Final Week Before Election

    Byinfo@50park.com

    The Tape Is Weak In a normal, non easy money world, we would say the market is tracing out a classic topping pattern and the days are numbered for this bull market. Last week we saw several major global central banks become “less dovish.” That doesn’t mean they won’t announce more easy money if markets…

  • Stocks Drift Lower After Blasé G-20 Meeting

    Byinfo@50park.com

    Technically, the fact that the Dow Jones Industrial Average, S&P 500, Nasdaq Composite and NYSE Composite all closed below their respective 200-day moving average (DMA) lines last week which bodes poorly for the current rally. Additionally, this unanimously ominous action suggests the market may retest its recent lows. Looking forward, the 50 DMA line may act as stubborn 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. It is also worrisome to see the 50 DMA line already slice below the 200 DMA line on the NYSE. This event is known by market technicians as a death cross and usually has bearish implications. Trade accordingly.

  • Markets Smacked As Global Economy Slows

    Byinfo@50park.com

    Market Outlook- Market In A Correction
    From our point of view, the market is back in a correction now that all the major averages closed below their respective 50 DMA lines and downward trendlines. Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. The next level of resistance is their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Want To Follow Trends?
    Learn How We Can Help You!

  • Rally Attempt Ends As Stocks Negatively Reverse

    Byinfo@50park.com

    Looking at the market, Tuesday’s ominous action effectively ended the current rally attempt and suggests a steeper correction may unfold. It is also important to see how the major averages react to their respective 50 DMA lines. Until they all close above that important level the technical damage remaining on the charts is a concern. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data. Remember that the recent series of distribution days coupled with the deleterious action in the major averages suggests large institutions are aggressively selling stocks. Disciplined investors will now wait for a new follow-through day to be produced before resuming any buying efforts. Until then, patience is paramount.

  • Robust Rally Continues!

    Byinfo@50park.com

    Monday-Wednesday’s Action: Stocks Successfully Test Support!
    Over the weekend, EU leaders kicked the can down the road and reschedule yet another meeting on Wednesday to tackle their onerous debt levels. Elsewhere, shares of Catepillar Inc. (CAT) gapped up after topping Q3 estimates and raised their 2012 forecasts. The news on the M&A front was healthy- shares of RightNow Technologies (RNOW) and Healthspring Inc. (HS) gapped up after agreeing to be acquired on Monday.
    Stocks fell on Tuesday and turned negative for the week as investors digested the latest round of lackluster earnings and EU leaders kicked the can down the road. Since 2008, we have been telling clients that is impossible to solve a debt crisis with more debt! However, the cognoscenti feel otherwise and as always we shall let the markets guide us.The news from the economic front was less than stellar. Consumer confidence in the U.S. unexpectedly fell in October to the lowest level since March 2009, during the “Great Recession.” Separately, the S&P Case/Shiller index of home prices in 20 major U.S. cities fell and missed estimates in August which reiterates how weak the housing market is right now.
    Stocks bounced off support (SPX 1230) on Wednesday after Germany passed a plan to expand the EU bailout measure. In the U.S., durable goods topped estimates which bodes well for the economic recovery. Durable goods rose +1.7% in September which was the largest increase in six months and topped the +0.4% estimate. In other news, mortgage applications rose last week and recovered some of the losses from the previous week as demand for purchases and refinancing rose.
    Thursday & Friday’s Action: Risk Assets Surge on EU Deal!
    Stocks soared on Thursday after private lenders agreed to a 50% haircut on their Greek debt and EU leaders agreed to leverage the hell out of their EU bailout plan. French President Nicolas Sarkozy said the EFSF (European bailout fund) will be leveraged 4-to-5 times in an attempt to curb their excessive debt woes. Sarkozy also spoke with Chinese leader Hu Jintao who offered to help Europe from imploding. Economic data in the U.S. was positive, the Labor Department said weekly jobless claims came in at 402,000 which barely beat expectations. More importantly, GDP jumped +2.5% last quarter which matched estimates and bodes well for the economic recovery. Stocks were relatively quiet on Friday after consumer spending rose but incomes remained lackluster.
    Market Outlook- Confirmed Rally:
    The major U.S. averages are back in a new confirmed rally and broke above the mid-point/resistance of their 6-week bullish double bottom base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12, when it rallied over 2% on heavier volume than the prior session. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! 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!