Monday, October 11, 2010
Stock Market Commentary:
Stocks ended flat as the US dollar rallied and a slew of stocks ended near their session lows. Volume totals were reported lighter on the NYSE and on the Nasdaq exchange compared to Friday’s session, which signaled that large institutions were not aggressively buying or selling stocks. Advancers led decliners by a small margin on the NYSE but trailed by a small margin on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on both exchanges.
Slower Economic Growth Forecasts Curb Gains:
Overnight, stocks in Europe and Asia rallied after the IMF and global leaders met in Washington D.C to discuss the global economy. Global leaders reaffirmed their support for continued global economic growth coupled with low debt. Elsewhere, the National Association for Business Economics (NABE) said its 46-member forecasting panel cut US economic growth projections for both 2010 and 2011 to just +2.6%. In May, the last time they were surveyed, their outlook was +3.2%. Stocks gave back earlier gains after the US dollar rallied. Remember that earnings season has begun and it is very important to protect your capital in the event of an adverse reaction to earnings.
Market Action- Confirmed Rally:
So far, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been very strong and stocks are simply pausing to consolidate their recent gains. It was encouraging to see the bulls show up and defend support (formerly resistance) in recent weeks. The next level of support for the major averages is their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. Trade accordingly.