Daily Market Commentary

Global Central Banks Help The Euro

Thursday, September 15, 2011
Stock Market Commentary:

Stocks opened higher on Thursday after several central banks around the world agreed to provide dollar liquidity to help the Euro. The major averages continued trading between support and resistance of their current base but most European markets, fell to fresh 2011 lows (which bodes poorly for US stocks). At this point, the current rally is under pressure evidenced by several distribution days (heavy volume declines) since the latest FTD. It is important to note that even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

Central Banks Help The Euro & U.S. Economic Data Is Soft:

A slew of major Central Banks around the globe stood together and provided dollar liquidity to Europe. This helped allay short term fears that the Euro would fail which helped “risk assets” rally. However, U.S. economic data was less than stellar as weekly jobless claims topped estimates for 411k and rose 11,000 to 428k. Elsewhere, the consumer price index (CPI), rose +0.4%,which was lower than the +0.5% reading in July. Core prices, which exclude food and energy matched estimates and rose +0.2%. The September Philly Fed Survey fell -17.5 which was better than August’s reading of -30. It is “good” to see stocks shrug off the lackluster economic news and rally.

Market Outlook- Rally Under Pressure:

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when several distribution days emerge or August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.