New Rally Confirmed!

Wednesday, September 1, 2010
Stock Market Commentary:

Stocks soared on Wednesday, produced a proper follow-through day (FTD), and confirmed their latest rally attempt (which began on Friday) after fear eased that the global economic recovery was in peril. Wednesday’s reported volume totals were higher on the NYSE and the Nasdaq exchange compared to Tuesday’s already high levels which suggests large institutions were aggressively buying stocks. Advancers led decliners by over a 4-to-1 ratio on the NYSE and by over a 5-to-1 ratio on the Nasdaq exchange. New 52-week highs outnumbered new 52-week lows on the NYSE but were about even on the Nasdaq exchange. There were 48 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, sharply higher than the 16 issues that appeared on the prior session.

Strong Manufacturing Data From China & US Send Stocks Soaring!

Stocks surged as the US dollar and treasuries plunged after manufacturing in the US and China grew faster than economists expected. The stronger than expected manufacturing data from China and the US helped allay woes of a global economic slowdown and sent stocks soaring! Apple (AAPL) jumped on heavy turnover after Steve Jobs introduced updated versions of their iPod media players and iTunes software. The new versions are designed to be more social-media friendly and allow users to see what their friends are downloading, share, and “follow” other users.

Market Action- Confirmed Rally:

Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. It was encouraging to see a flurry of high ranked stocks trigger fresh technical buy signals and break out of sound bases on Wednesday. However, the major indices’ 50-day moving average (DMA) lines currently serve as near term resistance with their 200 DMA lines as the next important level to watch.
It is of the utmost importance to remain very selective because all of the major averages are still trading below their downward sloping 50 and 200 DMA lines and their 50 DMA lines remain below their longer term 200 DMA lines. This ominous pattern is known as a death cross and typically has bearish ramifications. It is also important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.
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