Daily Market Commentary

Day 7: Light Volume Fails To Confirm The Latest Rally Attempt

16 Feb

Tuesday, February 16, 2010
Market Commentary:

The major averages ended higher after the latest round of stronger than expected economic and earnings data was released. Volume, a critical indicator of institutional sponsorship, was lower than the prior session on both exchanges which prevented the major averages from producing a sound follow-through day.  Advancers trumped decliners by a large margin on the NYSE and Nasdaq exchange.  New 52-week highs outnumbered new lows on both exchanges.  There were 35 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, up from the 18 issues that appeared on the prior session.

Strong Manufacturing Data Lifts Stocks:


Continuing the recent trend that has prevailed for most of this year, the stock market opened with impressive gains on the first trading day of the week. In recent months, that has been followed by steady selling for the remainder of the week. Before Monday’s opening bell, the NY Fed released its Empire State Mfg index which topped the Street’s estimates. This was the fastest reading in four years and the first manufacturing report that was released in February. The stronger than expected report suggests that business conditions improved nearly +9 points to 24.91.

Q4 Earnings Are Strong:

In earnings news, Barclays (BCS) doubled its profit in 2009 which set the stage for a strong rally. The strong results suggest that banks are acting well and are on track for a strong 2010. The healthy economic and earnings data sent the dollar lower and helped offset concern that Greece will default on its ballooning debt. This week, approximately 45 companies in the S&P 500 are slated to release their Q4 results as earnings season winds down. So far, more than 350 companies in the S&P 500 have reported fourth-quarter earnings and about three-quarters of them have topped estimates according to Bloomberg.com.

Market Action:

Looking at the market, the major averages enjoyed robust gains on Tuesday but volume failed exceed the prior day’s session which indicates that large institutions are not aggressively buying stocks. As long as February 5th lows are not breached the window remains open for a new follow-through day (FTD) to emerge. A new follow-through day will confirm the current rally attempt and will be produced when one of the major averages rallies at least +1.7% on higher volume than the prior session as a new batch of leaders breakout of sound bases. However, if 2.5.10 lows are breached then the day count will be reset and a steeper correction may unfold.
It is also important to see how the major averages react to their respective 50-day moving average (DMA) lines which were support and are now acting as resistance. 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 which remains a concern. Remember that the market remains in a correction until a new new follow-through day emerges. Until then, patience is paramount.
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25 Oct
Blog

7 Things That Concern Me About This Rally- Right Now

1. We have come too far too fast. How many times do you remember seeing the SP500 soar 17% in 3 weeks (or know of it ever happening in history)? And the kicker- the move has been on below average volume! Moreover, if the market is to get back to 1370 (2011 highs) by year end- it will have to move 28% from Oct 4- Dec 31. Possible, but probable?
2. Nothing has changed- the “fundamental” mess that sent a slew of risk assets lower over the summer (i.e. US and EU debt issues, anemic economic growth, etc.)- are still unresolved… Everyone (right now) is focused on Greece. However, even if Greece is “handled” it does not address the broader issue: The other PIIGS are broke!

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3. Most bear markets last 18-24 months- not less than 1 day. The S&P 500 officially hit bear market territory on 10/4 (down 20% from its 2011 high) and that lasted for a tenth of a second because that was the exact low for the year (so far). Normally, the 18-24 months allow stocks to reset their bases and paves the way for new leadership to emerge.
4. I find it very interesting to see the stock market “bottom” (at least for now) on 10/4 because that is the EXACT day the Fed started operation “twist.” Coincidence? You make the call. Remember QE 2 in 2010 led to a nice long rally. Will twist do the same? No one knows just yet.
5. I find it VERY Interesting- (for what it is worth) to see the low on 10/4 undercut support by ~25 points (support was 1100 and the low was 1074.77) and then Monday’s -10.24.11- high was ~25 points above resistance (resistance was 1230 and Monday’s high was 1256.55)
6. Remember, that some of the market’s largest moves (both up and down) occur during bear markets. Since the beginning of August, volatility has surged- in both directions!
7. Leadership has rotated. Here’s a quick glance at some of the stocks we have given out to our clients in recent weeks:
UA – fresh heavy volume breakout Tuesday (now pulling back)
CMG
MCD
AAPL
GOOG
INTC
ISRG
WFM
WMT
NUAN
Conclusion:
All this is just noise. Remember, markets climb a wall of worry. As long as the S&P 500 trades above its 50 DMA line, it deserves the bullish benefit of the doubt!
Trade wisely,
Adam Sarhan
 



15 Sep
Daily Market Commentary

Stocks Edge Higher As Dollar Falls

Wednesday, September 15, 2010
Stock Market Commentary:

Wednesday marked the second anniversary of the Lehman Brothers bankruptcy which accelerated the credit and financial crisis. Stocks ended higher as the US dollar fell for a fifth consecutive day against the euro and investors looked past tepid economic data from the NY Fed. Volume was reported slightly lower on the NYSE and about even on the Nasdaq exchange compared to Tuesday’s levels. Advancers led decliners by a small margin on the NYSE and on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange. There were 46 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 69 issues that appeared on the prior session.

Stocks Shrug Off Weak Economic Data:

Stocks opened lower after New York-area manufacturing and other industrial data slowed and missed forecasts. The The Federal Reserve Bank of New York’s general economic index slid to -4.1 in September which was the lowest reading since July 2009 and lower than August’s reading of +7.1. The reading was also lower than the Street’s estimate for a rise to 8 which is above the boom/bust level of zero. Oversea’s, the Bank of Japan (BOJ) intervened in the currency market to curb the Yen’s recent free-fall. The news helped send the US dollar lower for the fifth consecutive day which also helped lift dollar denominated assets; mainly stocks and commodities.  

Market Action- Confirmed Rally

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24 Mar
Daily Market Commentary

Stocks Down; Dollar Up

Wednesday, March 24, 2010
Market Commentary:

The major averages, US Treasuries, the euro and a slew of commodities pulled back as the dollar advanced after Portugal’s debt was downgraded by Fitch.The volume total on the NYSE was about even compared to Monday’s totals, while volume was reported slightly higher on the Nasdaq exchange. Decliners led advancers by more than a 2-to-1 ratio on the NYSE and on the Nasdaq exchange. There were 29 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 77 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

Euro Tanks As Dollar Rallies:

Overnight, Fitch Ratings downgraded Portugal due to its ballooning debt concerns. This, coupled with the fact that France and Germany are close to reaching a deal with the IMF to rescue Greece sent the euro plunging. Investors are concerned that more European countries will need to be bailed out as they struggle to deal with their mounting debt. The euro fell against 12 of its 16 peers and hit a new 10-month low against the greenback. The US dollar rallied which put pressure on US stocks and commodities. The Reuters/Jefferies CRB Index of commodities slid to a five-week low, dragged lower by oil, gold, sugar, and copper.

Economic Data Mixed:

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23 Mar
Daily Market Commentary

Stocks Edge Higher On Stronger Than Expected Housing Market

Tuesday, March 23, 2010
Market Commentary:

The major averages ended higher after stronger-than-expected data was released from the ailing housing market. Volume totals were higher compared to Monday’s totals on both major exchanges. Advancers led decliners by over a 2-to-1 ratio on the NYSE and by a 2-to-1 ratio on the Nasdaq exchange. There were 77 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 45 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

Stronger Than Expected Housing Data Lifts Stocks:

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09 Mar
Daily Market Commentary

Bulls Celebrate March '09 Bottom

Tuesday, March 9, 2010
Market Commentary:

The major averages ended higher on the one year anniversary of the 2009 bear-market low close for the benchmark S&P 500 index amid speculation the economy will continue to recover from the worst recession since WWII.  Volume, a critical gauge of institutional demand, was reported higher than the prior session on the Nasdaq exchange and on the NYSE. Advancers led decliners by a narrow margin on the NYSE and Nasdaq exchange. There were 62 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, down from the 76 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

Market’s Enjoyed Best 12-Month Rally In 80 Yrs!

The benchmark S&P 500 is up a very impressive +69% since hitting a 12-year low of 666.79 last March. This has been the largest 12 month rally for the benchmark average since the Great Depression. Despite that impressive feat, the S&P 500 is still down -28% from its October 2007 high of 1,576. It is also important to note that the vast majority of stocks that helped the major averages enjoy strong gains last year were low ranked stocks that bounced from egregiously oversold levels (i.e. Citigroup went from $0.97 to $5.43).

Increasing Number Of Healthy Breakouts!

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02 Mar
Daily Market Commentary

Cautious Follow-Through Day Confirms New Rally

Tuesday, March 2, 2010
Market Commentary:

The paper categorized Monday’s gain as a “cautious follow-through day” which confirmed the latest rally attempt. Stocks edged higher on Tuesday after India’s economy grew nicely last year and speculation spread that the European Union will bail out Greece. Volume, a critical gauge of institutional demand, was reported higher on both major exchanges compared to Monday’s levels. Advancers led decliners by a nearly a 3-to-1 ratio on the NYSE and by a 2-to-1 ratio on the Nasdaq exchange. New 52-week highs trumped new lows on both exchanges which was another welcome sign while there were 76 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, up from the 69 issues that appeared on the prior session.

India’s Economy Lifts Stocks:

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17 Feb
Daily Market Commentary

Day 8: Both Stocks & The US Dollar Rally

Wednesday, February 17, 2010
Market Commentary

The major averages ended higher on the 8th day of their current rally attempt after the latest round of healthy economic and earnings data was released. Volume, a critical indicator of institutional sponsorship, was mixed; higher on the Nasdaq and lower on the NYSE compared to the prior session. Advancers led decliners by a 2-to-1 ratio on the NYSE and by a 16-to-11 Nasdaq exchange.  New 52-week highs outnumbered new lows on both exchanges.  There were 27 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, down from the 35 issues that appeared on the prior session.

Both Stocks & The Greenback Rally:

It was interesting to see both stocks and the US dollar rally on Wednesday after upbeat earnings and economic data was released. Healthy earnings from Deere & Co (DE +5.02%), Whole Foods Market Inc. (WFMI +12.55%) and Hewlett-packard Co (HPQ +1.38%) helped the bulls send stocks higher. So far, three-quarters of S&P 500 companies have posted stronger than expected Q4 results which bodes well for the US economy.

Healthy Economic Earnings Data Lifts Stocks:

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07 Jan
Daily Market Commentary

Nasdaq Retreats; Other Major Averages Advance

Thursday, January 7, 2010
Market Commentary:

The major averages ended mixed after positive retail sales and weekly jobless claims were released. Volume, an important indicator of institutional sponsorship, was reported about even to slightly higher than Wednesday’s totals which indicated large institutions were accumulating, not distributing, stocks. Advancers led decliners on both major exchanges which was a positive sign. There were 32 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the total of 57 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange, and new lows were again near the single digits.

Jobless Claims:

At 8:30AM EST, the Labor Department said new claims for unemployment benefits rose less than forecast to +434,000 in the week of January 2, 2010. Every Thursday, the Labor Department releases the report which compiles data showing the number of individuals who filed for unemployment insurance for the first time. Remember, the report is counter intuitive because an increasing number means more people are filing for unemployment claims and suggests the labor market is waning. The converse is also true, lower readings is a sign of strength. Investors tend to look at the four-week moving average because it smoothes out weekly volatility. Investors are now focused on December’s employment report which is slated to be released before Friday’s opening bell. Analysts believe that last month’s reading will be unchanged which bodes well for the ailing jobs market. So far, since the recession began, US employers slashed over 7 million jobs as the unemployment rate hit a two decade high of 10.2% in the fourth quarter.

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