Tuesday, October 18, 2011
Stock Market Commentary:
Stocks confirmed their latest rally attempt on Tuesday day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD). It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can proceed with caution as long as the major averages remain above their 50 DMA lines. The next important area of resistance is their September highs and then their 200 DMA lines. Several key risk assets (multiple stock markets around the world, Copper, Crude Oil, etc.) officially entered bear market territory over the in recent months which bodes poorly for U.S. stocks and the global economy.
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Earnings Mixed, France May Be Downgraded, China’s Economic Slows, and Inflation Jumps in U.S.:
Stocks opened lower on Tuesday as investors digested a slew of earnings and economic data. Before the open, Johnson & Johnson (JNJ), Bank of America (BAC), and Goldman Sachs (GS) all missed estimates which weighed on futures. After Tuesday’s close, Apple Inc. (AAPL) reported very strong results. The news from the economic front was not ideal. The U.S. producer price index (PPI), which is used to measure inflation and has been very tame of late, topped estimates in September and jumped to the fastest increase in five months. The Labor Department said wholesale prices rose +0.8% which easily topped the +0.2% reading expected on Wall Street. The news from overseas was not ideal. S&P, one of the three popular rating agencies, put France on a negative watch and the latest data from China indicated their economy continued to slow. Before Tuesday’s close, rumors spread that the E.U. bailout plan would be passed, sooner rather than later. This sent stocks soaring in the latter half of the session.
Market Outlook- Confirmed Rally:
The major U.S. averages are back in a new confirmed rally and are flirting with resistance of their current 2.5 month base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011 when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is September’s highs and then the 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.
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On Tap This Week:
MONDAY: Industrial production, Fed’s Lacker and Evans speak; Earnings from IBM
TUESDAY: PPI, treasury international capital, housing market index, Bernanke speaks; Earnings from BofA, Coca-Cola, Goldman Sachs, J&J, Apple, Intel, CSX and Yahoo
WEDNESDAY: Weekly mortgage apps, CPI, housing starts, Fed’s Rosengren speaks, oil inventories, Fed’s Beige Book; Earnings from Morgan Stanley, Travelers, United Tech, AmEx, Ebay, Western Digital
THURSDAY: Jobless claims, existing home sales, Philadelphia Fed survey, leading indicators, Fed’s Bullard and Kocherlakota speak, NewsCorp investor day; Earnings from AT&T, Eli Lilly, Nokia, AutoNation, Microsoft, Capital One, Chipotle and SanDisk
FRIDAY: Fed’s Kocherlakota speaks, 2011 Dodd-Frank Rulemaking Deadline; Earnings from GE, McDonald’s, Verizon, Honeywell and Schlumberger