SPX- The Trading Range Tightens
Monday, January 09, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets were quiet as investors waited for earnings season to officially begin. Investors are hopeful that 2012 will be a better year for U.S. equities and risk assets than 2011 or 2010. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line (shown above). Looking forward, the next area of resistance remains Q4’s highs (1292) and then 2011 highs near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above its 200 DMA line.
European Leaders Meet & Earnings Season Begins!
Stocks were relatively quiet on Monday as EU leaders met to discuss their debt problems and Alcoa officially kicked off Q4 earnings season. In Europe, French President Sarkozy and Germany’s PM Merkel met and said they want to complete their negotiations on a new treaty in the coming days so it could be signed by March 1, 2012. Meanwhile, Germany sold 3.9 billion euros ($4.9 billion) in six-month T-Bills with a negative yield for the first time in modern history. Later this week, Italy and Spain will try to raise money by selling bonds, hopefully it will not be a total bust. After the bell, Alcoa kicked off earnings season when they released their Q4 results. As always, it is very important to focus on how stocks react to earnings and not just the earnings.
Market Outlook- New Rally Confirmed
Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support. Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!