Tuesday, August 23, 2011
Stock Market Commentary:
Stocks confirmed their latest rally attempt on Tuesday when the tech-heavy Nasdaq composite surged +4.29% on heavier volume than Monday’s session. This confirmed the latest rally attempt which began 11 days ago on August 9, 2011. The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. 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.
European and U.S. Economic Data Remains Soft:
Before Tuesday’s open, Germany’s ZEW Economic Sentiment Survey tumbled to -37.6 in August from -15.1 in July. In France, the country’s preliminary Manufacturing PMI slid to49.3 in August from 50.5 in July. The broader Eurozone data also failed to impress. The Eurozone Manufacturing PMI fell to 49.7 in August from 50.4 in the prior month. The Eurozone ZEW Economic Sentiment reading plunged to -40.0 from -7.0in July. In the U.S., new home sales fell to a five month low and missed estimates. The Commerce Department said new home sales slid -0.7% to a seasonally adjusted 298,000-unit annual rate which was the lowest reading since February. June’s pace was revised down to 300,000 units from the previously reported 312,000 units. The one glimmer of hope was that supply, a critical component to determining market price, fell sharply. Despite the weaker than expected economic data from Europe and the U.S., it was interesting to see stocks rally as hope spread that Bernanke’s Jackson Hole speech on Friday will have the same effect as it did last year on risk assets.
Market Outlook- New Rally Confirmed!
The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. This action suggests a subtle and bullish shift may be on the horizon. 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 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.