Wednesday, November 24, 2010
Stock Market Commentary:
Stocks and a handful of commodities rallied on Wednesday thanks to a series of stronger than expected economic data coupled with relative calm overseas. The rally which began on the September 1, 2010 follow-through day ended on Tuesday. November 16, 2010 as stocks and commodities plunged in heavy trade. Wednesday marked day 1 of a new rally attempt, which means that as long as Wednesday’s lows are not breached, the earliest a possible FTD could emerge will be Monday, November 22, 2010.
Geopolitical Woes Ease But Euro Is “In Danger”:
News was relatively quiet overseas which set the stage for a strong open in the US. This week the euro has been smacked hard as several EU political heavy weights expressed concern regarding the fate of the EU. German Chancellor Angela Merkel said on Tuesday that the Euro was in danger. On Wednesday, Ivan Miklos, Slovakia’s finance minister said the euro zone may break up or function with serious problems due to the ongoing debt woes.
U.S. Economic News Is Mixed:
The economic news was mixed but it was encouraging to see stocks rally which bodes well for this 6 day rally attempt. Before Wednesday’s open, the Labor Department said jobless claims fell which helped allay concerns that the ailing jobs market was not recovering. Elsewhere, durable goods and new home sales both fell short of analyst estimates which bodes poorly for the ailing housing market.
Market Action- 12 Week Rally Ends – Week 2- In A Correction:
It was encouraging to see the bulls show up and defend the Dow Jones Industrial Average’s 50 DMA line. The 12-week rally ended on Tuesday, November 16, 2010 after the major averages plunged in heavy volume back down towards their respective 50 DMA lines. In recent weeks, we have repeatedly written about how the major averages were experiencing wide-and-loose action after a big move and made it very clear that that was not a healthy sign. At this point, we are looking for a new rally to be confirmed with a new follow-through day before taking any new positions. Caution and patience are key at this point. Trade accordingly.
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