Tuesday, March 22, 2011
Stock Market Commentary:
On Tuesday, stocks were quiet as investors digested a rather volatile trading week. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. The current crisis in the Middle East remains in flux which is putting upward pressure on oil and gold and downward pressure on equities. The benchmark S&P 500 was up nearly 100% from its March 2009 low before its latest correction and is still about -17% off its all-time high from October 2007.
50 Day Moving Average line Is Resistance & Home Prices Continue to Fall:
Stocks were quiet on Tuesday as the benchmark S&P 500 and tech-heavy Nasdaq composite remain below their respective 50 DMA lines. It is important to note that since the summer 2010 low, the 50 DMA line has served as formidable support for the major averages and is currently acting as resistance. Therefore, the first important step needed for this market to move into fresh new high territory is for the major averages (and leading stocks) to repair this important level. Until then, the 50 DMA line will serve as resistance. Elsewhere, the Federal Housing Finance Agency (FHFA) said its Home Price Inde (HPI) fell -0.3% in January which is the latest in a series of weaker-than-expected data from the ailing housing market.
Market Action- Market In A Correction; 28-Week Rally Ends
All the major averages sliced below their respective 50 DMA lines on Thursday, March 10, 2011. Thursday, March 17, 2011 marked day 1 of a new rally attempt which means that the earliest a possible follow-through day (FTD) could emerge would be Tuesday, as long as Thursday’s lows are not breached. That said, the window is now open for a new FTD to emerge which will confirm the current rally attempt. However, if Thursday’s lows are breached, then the day count will be reset and odds will favor lower prices, not higher, will follow. It is important to note that the recent ominous action reiterates the importance of raising cash and playing strong defense until a new FTD emerges. If you are looking for specific help navigating this market, please contact us for more information.