Tuesday, March 29, 2011
Stock Market Commentary:
Stocks were quiet after two important economic reports were released: S&P Case/Shiller Home Price Index and consumer sentiment. It was encouraging to see a slew of leading stocks and the benchmark S&P 500, Dow Jones Industrial Average, Nasdaq composite, and small cap Russell 2000 index all close above their respective 50 DMA lines last week. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. However, the correction was short lived when a new rally was confirmed on Thursday March 24, 2011′s healthy action. The healthy action suggests the bulls are back in control.
Home Prices & Consumer Confidence Fall:
Before Tuesday’s open, the S&P/Case-Shiller index of home prices in 20 major cities slid -3.1% from January 2010 which was the largest year-over-year decline since December 2009. The decline was the latest in a series of weaker than expected data from the ailing housing market. After the open, the latest reading on consumer confidence missed estimates. The Conference Board’s consumer confidence index fell to a three month low of 63.4 which was lower than the Street’s forecast of 65. The down tick in consumer confidence was largely attributed to surging energy prices.
Market Action-Confirmed Uptrend
From our point of view, the market is back in a confirmed uptrend after a modest (and healthy) -6% correction from its post-recovery highs. The fact that the Dow Jones Industrial Average, small-cap Russell 2000 index, and Copper all closed above their respective 50 DMA lines on Wednesday March, 23 was a very healthy sign and suggests higher prices will follow. The very next day, the benchmark S&P 500 regained that important level and broke above its downward trendline (shown above). Couple that with the fact that other markets like Oil, Silver, and Gold are all at fresh post recovery highs suggests it is only a matter of time until equities follow. The final bullish sign for us was that a slew of high ranked stocks triggered fresh technical buy signals this week which suggests higher, not lower prices lie ahead. If you are looking for specific help navigating this market, please contact us for more information.