Daily Market Commentary

Stocks Fall; 50 DMA Line Violated!

Thursday, April 14, 2011
Stock Market Commentary:

Stocks opened lower after jobless claims rose and inflation edged higher. Thursday was the third consecutive day, the bears showed up and quelled the bulls’ efforts. From our vantage point, the current rally is under pressure as all the major averages are flirting with their respective 50 DMA lines (Nasdaq composite, S&P 500, and NDX already violated their respective 50 DMA lines). 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.

Jobless Claims & PPI Weigh On Stocks:

Before Thursday’s open, the Labor Department said weekly jobless claims unexpectedly rose +27,000 in the first week of April to 412,000. That was the largest weekly gain in two months and easily topped analysts’ estimates for a reading of 380,000. In other news, the producer price index (PPI) was released which showed mixed results. Overall PPI eased a bit but remained elevated with a +0.7% gain in March. Core prices which excludes food and energy rose by 0.3% which followed a +0.2% gain in February. The largest component that grew last month was surging energy prices.

Market Action- Rally Under Pressure

The current rally which began with the Thursday, March 24, 2011 FTD is now under pressure as several of the major averages violated their respective 50 DMA lines for the fifth consecutive day. Remaining objective, it is bullish to see several leading stocks continue to act well (LULU, BIDU, DECK, PCLN, OPEN, SINA, etc) but the deterioration in the major averages can not be ignored. If you are looking for specific help navigating this market, please contact us for more information.