Friday, March 11, 2010
Market Commentary:

The major averages jumped to a new recovery high on the second week of the confirmed rally. Volume was very light which was not an encouraging sign as the major averages rallied. Advancers led decliners for most of the week and new 52-week highs again overwhelmingly trumped new lows on both exchanges which is a strong sign of accumulation.

Monday- Wednesday:

Stocks ended mixed on Monday as President Obama gave what appeared to be a final push to overhaul our troubled health-care system.   Tuesday marked the one year anniversary of the March 2009 closing low in the benchmark S&P 500. A follow-through day (FTD) was produced on March 12, 2009 which helped confirm the rally which sent the benchmark average soaring +68% in the span of 12 months. Stocks edged higher on Wednesday which marked the tenth anniversary of 2000’s dot-com bubble. The government said the US budget deficit widened to a record last month. Government spending was the primary culprit as the government continues to try and revive the economy.

Thurs & Friday:

Stocks rose on Thursday after China said inflation rose +2.7% in February, up from +1.5% in January. For the past few months, China has taken several steps to curb inflation and its robust economy. Their actions sent stocks lower as many people were concerned about what the ramifications would be for the ongoing economic recovery. Therefore, the higher reading on inflation could cause China to raise interest rates which could, in turn, hinder the economic recovery. In the US, two important economic reports were released: weekly jobless claims and the latest trade data. The Labor Department said weekly jobless claims fell by 6,000 to 462,000 which was a positive sign. Elsewhere, the Commerce Department said the trade deficit contracted in January due to a large drop in imported oil and cars. The report showed that US exports slid -0.3% which was concerning because the drop in overseas sales could slow the recovery.

Market Action- Confirmed Rally:

Looking at the market, since the March 1, follow-through-day (FTD) the market and a batch of leading stocks steadily rallied. The fact that we have not seen any serious distribution days since the FTD bodes well for this nascent rally. It is also a welcome sign to see the market continue to improve as investors digest the latest round of stronger than expected economic and earnings data.Remember that now that a new rally has been confirmed, the window is open to start buying high quality breakouts. Trade accordingly.
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