Tuesday, April 5, 2011
Stock Market Commentary:
Stocks were traded between positive and negative territory on Tuesday after Portugal’s debt rating was cut and China took its latest step in curbing its red-hot economy. It was encouraging to see a slew of leading stocks and the benchmark S&P 500, Dow Jones Industrial Average, Nasdaq composite, and small cap Russell 2000 index all close and stay above their respective 50 DMA lines in late March. 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. However, the correction was short lived when a new rally was confirmed on Thursday March 24, 2011′s healthy action. Since then, the action remains healthy which suggests the bulls are back in control of this market.
China, Portugal, and Fed Minutes
Before Tuesday’s open, China raised its reserve requirement in its latest attempt to curb inflation and its red-hot economy. Elsewhere, Portugal’s debt rating was cut which put downward pressure on the euro. In the U.S., the Federal Reserve released the minutes of its latest meeting which largely reiterated their recent stance that the economy continues to improve, albeit slowly. Fed Chairman Ben Bernanke, said policy makers must watch inflation “extremely closely.” Keep in mind that the Fed’s mandate is twofold: curb inflation and maintain steady economic growth. That said, the recent surge in food and energy prices (i.e. soaring commodity prices) is putting mild pressure on the Fed to raise rates in the foreseeable future.
Market Action-Confirmed Uptrend
The market is back in a confirmed uptrend after a modest (and healthy) -6% correction from its post-recovery highs. We find it very bullish to see the mid cap S&P 400 index hit a fresh all time high and the small cap Russell 2000 index flirt with its all time high. in addition, the Dow Jones Industrial Average vaulted to a fresh post-recovery high and the S&P 500 and Nasdaq composite are just shy of fresh 2011 highs! Finally, we are very happy to see a slew of high ranked stocks trigger fresh technical buy signals in recent weeks which suggests higher, not lower prices lie ahead. If you are looking for specific help navigating this market, please contact us for more information.