EU Debt Drama Continues to Unfold

Byinfo@50park.com

Tuesday, September 13, 2011
Stock Market Commentary:

Stocks were quiet on Tuesday as the world waited to see what would happen in Europe. The major averages continued trading between support and resistance of their current base but most European markets, fell to fresh 2011 lows (which bodes poorly for US stocks). At this point, the current rally is under pressure evidenced by several distribution days (heavy volume declines) since the latest FTD. It is important to note that even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

Hope Over Greek Default Helps Markets & U.S. Economic Data Mixed:

The market continued to go virtually nowhere as investors continue to wait for a resolution to the ongoing situation in Europe. In their latest attempt to allay investors’ concerns, the heads of Greece, Germany and France will hold a joint press conference on Wednesday. In the U.S., the National Federation of Independent Business (NFIB) said its Small Business Optimism Index slid -1.8 points to 88.1 in August which was the sixth consecutive monthly decline. Separetely, import prices fell -0.4% largely due to a decline in energy and export prices rose +0.5%.

Market Outlook- Rally Under Pressure:

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when several distribution days emerge or August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

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