Wednesday, January 04, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets ended mixed to lower as fears resurfaced out of Europe. Investors are hopeful that 2012 will be a better year for U.S. equities and risk assets than 2011 or 2010. 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 (shown above). Looking forward, the next area of resistance remains Q4’s highs (1292) and then 2011 highs near 1370. In addition, the bulls do not want to see the S&P 500 trade below its 200 DMA line.

EU Fears Resurface:

On Wednesday, stocks slid as fears resurfaced regarding refinancing Europe’s onerous debt levels. Overnight, commercial banks in Europe deposited a new record of 453B euros (~$591B) at the European Central Bank (ECB) which sparked fears regarding the underlying health of the European banking system. Italy’s largest bank, UniCredit SpA, sold new shares to raise 7.5B euros (~$9.8B) to help strengthen its capital position.

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 (downward trendline and 200 DMA line). 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!