Stocks Bounce From Oversold Levels

DJIA- Will The 50 DMA Line Become Resistance
DJIA- Will The 50 DMA Line Become Resistance

Wednesday, April 11, 2012
Stock Market Commentary:

Stocks and other risk assets bounced back on Wednesday helping alleviate their oversold conditions. Alcoa (AA) officially kicked off earnings season with a bang after they beat already depressed expectations. Over the next few weeks it is paramount that we not only pay attention to the actual numbers but how the stocks (and major averages) react to the numbers. The fact that the Dow Jones Industrial Average, Small Cap Russell 2000, and S&P 500 are all below their respective 50 DMA lines suggests that this important moving average might become an area of resistance.

Q1 Earnings Season Begins & EU Debt Woes Ease, For Now:

On Wednesday, stocks and other risk assets bounced around the globe helping the Dow Jones Industrial Average snap a 5-day losing streak. Fears regarding the EU debt crisis eased on bit on Wednesday which helped risk assets. Economic data was mixed, the Labor Department said import prices rose +1.3% March which was the largest gain in nearly one year and easily beat the Street’s expectation for a gain of +0.8%. The Fed’s Beige Book showed modest economic conditions across much of the country.

Market Outlook- In A Correction

From our point of view, the stock market is back in a correction as the Dow Jones Industrial Average, Russell 2000, and S&P 500 all traded below their respective 50 DMA lines. Remember, it is quite normal to see markets pullback to digest their latest move but from a risk/reward standpoint, being heavily long right now does not offer an optimal risk/reward level. However, once these major averages get back their respective 50 DMA lines, then one can easily return to the long side. As always, keep your losses small and never argue with the tape. 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!
 

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