Investors Digest A Flurry of Economic Data

Thursday, March 4, 2010
Market Commentary:

Stocks traded between positive and negative territory and closed higher as investors digested the latest round of economic data. Volume, a critical gauge of institutional demand, was reported lower than the prior session on the Nasdaq exchange and on the NYSE. Advancers led decliners by a 11-to-8 ratio on the NYSE and by a 16-to-11 ratio on the Nasdaq exchange.  There were 31 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 46 issues that appeared on the prior session. New 52-week highs still overwhelmingly trumped new lows on both exchanges.

Investors Digest A Slew of Economic Data:

At 8:30am EST, the Labor Department said weekly jobless claims slid by –29,000 to 469,000 which fell short of the Street’s estimate for 475,000. It was encouraging to see claims fall after rising for most of February. The four-week average, which helps smooth out the data, slid by -3,500 in the week to 470,750,which was close to late January’s reading. Investors are now waiting for Friday’s official non farm payrolls report to be released. Analysts believe that the US economy shed -50,000 jobs last month.

Factory Orders & Pending Home Sales:

Two important reports were released at 10am EST: factory orders and pending home sales. Factory orders matched estimates and rose a very solid +1.7% in January. Orders for non-durable goods grew by +0.9% and durable goods orders, already released, were revised lower but still grew by +2.6%. Elsewhere, the National Association of Realtors said pending home sales, plunged by -7.6% to 90.4. The NAR blamed poor weather as the primary culprit for the poor reading.

Market Action- Confirmed Rally:

Looking at the market, the latest rally attempt was confirmed when a “cautious follow-through day” was produced by the Nasdaq Composite Index’s +1.6% gain on Monday, March 1st. Weighing into the decision to label the day a follow-through-day (FTD) was the strong action in leading stocks along with a great expansion noted in the new highs list.  That action suggests that there is a healthy crop of strong stocks capable of fueling a substantial rally higher for the major averages.  We will be looking out for any near-term distribution days (high volume declines) which would hurt the chances for this nascent rally to continue. Until then, the bulls deserve the bullish benefit of the doubt as the major averages continue edging higher.
It is 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.
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