Daily Market Commentary

Stocks Pullback After Strong Start To 2012

SPX- Profit taking after strong start to 2012

SPX- Profit taking after strong start to 2012

Monday, January 30, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets were lower on Monday as jitters spread regarding Greece and investors booked profits after a strong start to the year. 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.

Spending & Income Don’t Help Stocks:

On Monday, stocks and a slew of other risk assets fell as the month of January draws to an end. So far, this has been a strong month for risk assets and a little profit taking should be expected after such a strong move. The idea going forward is to assess the “health” of the pullback and see if it is nothing more than a short lived pullback or the beginning of something more severe. The news on the economic front did little to help stocks. Personal income rose by +0.5% last month in the U.S. which topped the Street’s forecast for an increase of +0.4%. Meanwhile, spending was flat during the final month of the year which just missed the average estimate for an increase of +0.1%.

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!