Daily Market Commentary

Economic Data Weighs On Stocks

SPX Rallied Over 4 Percent in Jan

SPX Rallied Over 4 Percent in Jan

Tuesday, January 31, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets were quit on the last trading day of the month as investors digested the latest round of economic and earnings data. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 is doing its best to stay above its Q4 2011′s high (~1292) and now has its sights set on its 2011 high near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line.

Weak End To Strong Month:

On Tuesday, stocks were quiet as investors digested the latest round of earnings and economic data. News on the economic front was less than stellar. The S&P/Case-Shiller index fell -1.3% in November which missed the Street’s estimate for a decline of -0.5%. Elsewhere, the Conference Board said consumer confidence unexpectedly declined in January, The index fell to 61.1, missing the Street’s estimate of 68. The Institute of Supply Management said its Chicago business barometer fell to its lowest level since August which is not ideal. Earnings continued to be released in droves with most companies meeting or slightly passing analysts estimates. After all was said and done, stocks and a slew of other risk assets (commodities and currencies) rallied in January, which bodes well for the global economy.

Market Outlook- New Rally Confirmed

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!