Daily Market Commentary

Stocks Mixed As Dollar Rallies

Monday, November 22, 2010
Stock Market Commentary:

Stocks and commodities fell as the USD rallied after Ireland’s political environment fell into turmoil. The rally which began on the September 1, 2010 follow-through day ended on Tuesday. November 16, 2010 as stocks and commodities plunged in heavy trade. Wednesday marked day 1 of a new rally attempt, which means that as long as Wednesday’s lows are not breached, the earliest a possible FTD could emerge will be Monday, November 22, 2010.

EU Debt Contagion Sends Stocks Lower:

Over the weekend, Ireland’s government said it would accept an emergency aid package from the EU/IMF. However, on Monday, the euro plunged in heavy trade after failing at resistance (formerly support near 138) after fear spread that other EU nations will need to be bailed out and Ireland’s credit rating may be downgraded. Moody’s Investors Service said a “ multi-notch” downgrade in Ireland’s Aa2 credit rating was “most likely” because the country’s emergency bailout package would increase (not decrease) its debt burden. Elections are slated for January and the Green Party said it would pull out of Prime Minister Brian Cowen’s coalition due to the onerous debt woes. The last thing the country needs right now is political instability. It will be very interesting to see how this plays out.

Market Action- 12 Week Rally Ends – Week 2 In A Correction:

The 12-week rally ended on Tuesday, November 16, 2010 after the major averages plunged in heavy volume back down towards their respective 50 DMA lines. In recent weeks, we have repeatedly written about how the major averages were experiencing wide-and-loose action after a big move and made it very clear that that was not a healthy sign. At this point, we are looking for a new rally to be confirmed with a new follow-through day before taking any new positions. However, we would be remiss not to note that the major averages deserve the bullish benefit of the doubt as long as they remain above their respective 50 DMA lines.  Caution and patience are key at this point. Trade accordingly.

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