Stocks and a slew of other “risk-on” assets spent most of the week rallying but fell hard on Friday as EU debt woes resurfaced. The market is back in rally-mode which suggests the path of least resistance is higher. The current rally was confirmed on the June 29, 2012 follow-through day (in the immediate wake of late June’s EU summit). At this point, investors appear to be looking past the larger macro concerns (e.g. a slowing global economy, European debt crisis, fiscal and monetary cliff in the US, et al) and looking for further stimulus from global central banks, as they continue to snap up risky assets.
MONDAY-WEDNESDAY’S ACTION- Stocks Rally On Hopes of Further Fed Action:
Stocks slid on Monday as investors digested the latest round of mixed to mostly weaker than expected economic and earnings data. Stocks fell after U.S. retail sales missed estimates and business inventories topped estimates. The Empire Manufacturing report beat estimates which bodes well for the NY area. Citigroup (C), one of the largest US banks, gained 0.6% following its mixed quarterly results. The financial giant said Q2 earnings were $0.95 which beat the Street’s estimate for $0.90. Visa (V) and Mastercard (MA) enjoyed nice gains after they agreed to settle merchant litigation totally $6.6B.
Stocks edged higher on Tuesday after Fed Chairman Ben Bernanke made it clear he still has a few more bullets left to stimulate the economy, if needed. Bernanke spent most of Tuesday and Wednesday on Capitol Hill in his semi-annual “Monetary Policy Report to the Congress.” Shares of Yahoo (YHOO) fell after the company said it hired Google’s Marissa Mayer as its new President and Chief Executive Officer. Mrs. Mayer joined Google (GOOG) in 1999, was their first female engineer, and was most recently responsible for Local, Maps, Location and other popular services for Google. News from the economic front largely matched estimates. The consumer price index (CPI) was unchanged in June which just missed the Street’s forecast for a gain of +0.1%. Core prices, which exclude food and energy, rose by +0.2%, matching estimates. Industrial production rebounded +0.4% which topped analysts’ forecast for a +0.3% gain. The strongest news came from the rebounding housing market which supports our thesis since Q4 2011 (most recently, we presented our bullish case publicly on CNBC’s closing bell on July 2). The nation’s home builders sentiment vaulted 6 points in July to 35. This was the largest monthly gain in nearly 10 years and the level, which has been moving higher all year, is now at its highest of the recovery, since March 2007! All regions report gains with strength centered in sales for the next six months.
Stocks rallied on Wednesday as Bernanke completed his two-day testimony on the Hill. The Fed’s Beige Book showed that “overall economic activity continued to expand at a modest to moderate pace in June and early July.” Stocks rallied on hope of a continued economic slowdown which would force the Fed’s hand into another round of QE. A slew of earnings were released and so far companies are beating already lowered expectations.
THURSDAY & FRIDAY’S ACTION- Stocks Sell Off On Friday As EU Woes Flare Up:
Stocks edged higher on Thursday after a slew of economic data missed estimates and the latest round of high profile stocks reported mixed earnings data. Stocks were bid higher after a flurry of weaker-than-expected economic data increased the odds for another round of QE by the Fed. Initial and continuing claims, existing home sales, the Philadelphia Fed, and leading indicators all missed estimates which reiterates Bernanke’s comments about a softening economy. Stocks were smacked on Friday and erased most of their gains for the week as fresh EU debt concerns resurfaced.
MARKET OUTLOOK- Confirmed Rally
From our point of view, the current market is in a confirmed rally which means the path of least resistance is higher. It is somewhat encouraging to see all the major averages close above their respective 50 DMA lines. Technically, the 200 DMA line and June’s lows are the next level of support while April’s highs are the next level of resistance for the major averages. As always, keep your losses small and never argue with the tape. 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!
Tuesday, March 01, 2011 Stock Market Commentary: Stocks negatively reversed (opened higher but closed lower) on Tuesday as traders digested the recent three day move. The current crisis in the Middle East remains in flux which is putting upward pressure on gold and oil and downward pressure on equities. The benchmark S&P 500 is up…
Friday, October 19, 2012 Stock Market Commentary: The major averages ended mixed last week but ended near their lows (which is not a healthy sign for the bulls) as sellers showed up in the latter half of the week and sold shares. So far, this is nothing more than a normal pullback after a big…
The fact that we have not seen any serious distribution days since the FTD bodes well for this nascent rally. It is also a welcome sign to see the market continue to improve as investors digest the latest round of stronger than expected economic and earnings data.Remember that now that a new rally has been confirmed, the window is open to start buying high quality breakouts. Trade accordingly.
Market Outlook- Market In A Correction
The latest action in the major averages suggests the market is back in a correction as all the major averages are flirting with their respective 200 DMA lines. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.
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Friday, June 29, 2012 Stock Market Commentary: Stocks and a slew of other “risk-on” assets surged on Friday after European leaders announced the latest “solution” to their onerous multi-year debt crisis. In the short-term, this will help investors look past the larger macro concerns that have plagued the market for the past few years and…
Dow Flirts With 200 DMA Line The major indices ended mostly lower last week amid the ongoing trade woes. In the first half of the week, President Trump said he will consider adding tariffs on nearly $200 billion worth of Chinese goods. A few days later, China responded by saying, the US has “delusions” regarding…