Stocks Fall As Dollar Rallies; S&P 500 Tracing Out A Possible Double Top?

Major Averages End Lower

The major averages ended lower as the US dollar surged on Thursday. Volume, a critical component of institutional demand, was higher on both major exchanges which marked the latest distribution day for the popular indexes. Decliners trumped advancers by about a 4-to-1 ratio on the NYSE and by about a 3-to-1 ratio on the Nasdaq exchange. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange but the number of actual leaders breaking out of sound bases remains very light.

The stock market and a slew of commodities sold off on Thursday as the U.S. dollar rallied. The greenback rallied against 15 of 16 major currencies as the Federal Deficit soared to a new record of $176.4 billion  in October. Elsewhere, billionaire investor Warrent Buffett said the financial panic is over and will be participating in a town hall event with fellow billionaire Bill Gates at Columbia University this evening.
Stocks sold off after Hewlett-Packard (HPQ) announced plans to acquire 3Com (COMS) for $2.7 billion. 3Com surged a whopping +31% on the news and enjoyed its single largest advance since 2007. This helped send a slew of computer networking stocks higher.

S&P Hits 13-Month High

Technically, the S&P 500, which hit a fresh 13-month high on Wednesday, failed to stay above the 1,100 mark for a second straight day. Since late October, 1100 has served as important resistance as investors continue to digest the latest round of earnings and economic data. That said, the fact that the S&P 500 remains perched below 1100 after having rallied +61% from its 12-year low in March and recovered nearly half of its steep decline from its all-time high in October 2007 is a very impressive feat. The S&P 500 currently sports a price-to-earnings (p/e) ratio of 21.81 which is the highest level since 2002. So far, over eighty percent of S&P 500 companies that reported Q3 results have topped estimates which has helped the market hold up rather well considering that profits were negative for a record ninth consecutive quarter.
What does all this mean for growth investors? Be patient and flexible with your approach. As always, continue to watch for leading stocks to breakout of sound bases before committing your capital. Do not force a trade, instead, let the market come to you; i.e. buy right and do not chase stocks. It is also important to remain cognizant of what is working in this environment: mainly buying very liquid large cap leaders as they bounce off their 50-day moving average lines or breakout of sound bases. Some of these leaders include: Apple Computer (AAPL), Amazon (AMZN), Priceline.com (PCLN), Google (GOOG), Baidu Inc. (BIDU) and Goldman Sachs (GS). The action in these names has served as a great proxy for the overall rally which began in March 2009. The timeless advice of famed investor Jesse Livermore remain true today: “Follow The Leaders.

Similar Posts

  • New! Bin Laden's Toast; Stocks Fall

    Market Outlook- Market In A Confirmed Rally
    From our point of view, the market is back in “rally-mode” as all the major averages continue to trade above their respective 50 DMA lines and are flirting with, or at, fresh 2011 highs! In addition, leading stocks have held up very well even as the major averages slid below their respective 50 DMA lines in mid-April which is another encouraging sign. If you are looking for specific help navigating this market, please contact us for more information.

  • Nasdaq 100 Surges To A Fresh 2011 High!

    Market Outlook- Confirmed Rally
    The last week of June’s strong action suggests the market is back in a confirmed rally. As our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests the rally is back in a confirmed rally as all the major averages are now flirting with fresh 2011 highs. Until all the major averages violate their respective 50 DMA lines on a closing basis, the market deserves the bullish benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Want To Follow Trends?
    Learn How We Can Help You!

  • Stocks Rally On E.U. Optimism

    Monday, December 5, 2011 Stock Market Commentary: Risk assets were mixed on Monday as optimism spread regarding the European debt crisis. From our point of view, the market confirmed its latest rally attempt on Wednesday, November 30, 2011 when all the major averages soared over +4% on monstrous volume in response to the global central banks coordinated efforts to…

  • Stocks Fall As Investors Digest Economic & Earnings Data

    Market Outlook- Confirmed Rally:
    The major U.S. averages are back in a new confirmed rally and are flirting with resistance of their current 2.5 month base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011 when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is September’s highs and then the 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.
    Fall Sale- We Will Double Your Order!!!
    Limited-Time Offer!
    www.FindLeadingStocks.com
    On Tap This Week:
    WEDNESDAY: Weekly mortgage apps, CPI, housing starts, Fed’s Rosengren speaks, oil inventories, Fed’s Beige Book; Earnings from Morgan Stanley, Travelers, United Tech, AmEx, Ebay, Western Digital
    THURSDAY: Jobless claims, existing home sales, Philadelphia Fed survey, leading indicators, Fed’s Bullard and Kocherlakota speak, NewsCorp investor day; Earnings from AT&T, Eli Lilly, Nokia, AutoNation, Microsoft, Capital One, Chipotle and SanDisk
    FRIDAY: Fed’s Kocherlakota speaks, 2011 Dodd-Frank Rulemaking Deadline; Earnings from GE, McDonald’s, Verizon, Honeywell and Schlumberger
    Source: CNBC.com

  • Week In Review- Stocks Soar on More Easy Money

    – Want Sarhan Capital To Manage Your Portfolio?  – Easy Money Reigns Supreme…For Now Once again, easy money, from the Fed and other central banks, continues to send stocks higher and distort the playing field. Every major central bank in the world is back in easy money mode (including the U.S. Fed). The easy money trade…

Leave a Reply

Your email address will not be published. Required fields are marked *