Friday, September 16, 2011
Stock Market Commentary:

Stocks rallied in the second week of September after fears eased regarding the Europe. The major averages continued trading between support and resistance of their current base but most European markets are still near their 2011 lows. At this point, the current rally is under pressure evidenced by several distribution days (heavy volume declines) since the latest FTD. It is important to note that even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

Monday-Wednesday:  Hope Over Greek Default Helps Markets & U.S. Economic Data Mixed

Last weekend, Greek Prime Minister George Papandreou, approved new measures that are designed to help the debt-stricken nation avoid a default and stay with the Euro. On Monday, several well-known European markets tanked to fresh 2011 lows as rumors spread that Germany, Europe’s largest economy, was preparing for a Greek debt default. In the U.S., President Obama gave a speech to urge Congress to pass his jobs plan. 

Stocks were quiet on Tuesday as investors continued to wait for a resolution to the ongoing situation in Europe. In their latest attempt to allay investors’ concerns, the heads of Greece, Germany and France will hold a joint press conference on Wednesday. In the U.S., the National Federation of Independent Business (NFIB) said its Small Business Optimism Index slid -1.8 points to 88.1 in August which was the sixth consecutive monthly decline. Separately, import prices fell -0.4% largely due to a decline in energy and export prices rose +0.5%.
Before Wednesday’s open, European markets edged higher after European Commission President Jose Manuel Barroso said the commission will present options regarding the introduction of new euro bonds. The heads of Greece, France, and Germany spoke today which helped allay concerns regarding a possible Greek default. Italy’s Parliament approved the confidence vote to approve the $54 billion austerity package.
In the U.S., the Commerce Department said retail sales were virtually unchanged in August which fell short of the +0.3% expected by the Street. Total retail sales reached $389.5 billion last month which was very close to the same number as July. Separately, the Labor Department said the producer price index (PPI) was flat last month, after a +0.2% gain in July.

Thursday & Friday: Central Banks Help The Euro & U.S. Economic Data Is Soft

A slew of major Central Banks around the globe stood together and provided dollar liquidity to Europe. This helped allay short term fears that the Euro would fail which helped “risk assets” rally. However, U.S. economic data was less than stellar as weekly jobless claims topped estimates for 411k and rose 11,000 to 428k. Elsewhere, the consumer price index (CPI), rose +0.4%,which was lower than the +0.5% reading in July. Core prices, which exclude food and energy matched estimates and rose +0.2%. The September Philly Fed Survey fell -17.5 which was better than August’s reading of -30. It is “good” to see stocks shrug off the lackluster economic news and rally. On Friday, stocks edged higher on continued optimism regarding a solution to the debt situation in Europe.

Market Outlook- Rally Under Pressure:

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when several distribution days emerge or August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.