Stocks Get Smacked On Lackluster Economic Data

Thursday, June 24, 2010
Stock Market Commentary:

The major averages got smacked on Thursday sending the benchmark S&P 500 Index to its longest losing streak in seven weeks, dragged lower by the ailing  financial sector and the latest round of tepid economic data. Volume totals were reported higher on the NYSE and the Nasdaq exchange compared to Wednesday’s levels which marked the latest distribution day and suggests large institutions are aggressively selling stocks. Decliners trumped advancers on the NYSE and on the Nasdaq exchange. There were only 2 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, barely higher than the 1 issue that appeared on the prior session. Leadership has evaporated, and without a healthy crop of leaders hitting new highs it is hard for the major averages to sustain a rally.  New 52-week highs outnumbered new 52-week lows on the NYSE but trailed by a large margin on the Nasdaq exchange.

Lackluster Economic Data Rocks The Market:

Before Thursday’s opening bell, two separate government reports showed unemployment claims fell from a two-month high while durable-goods orders excluding transportation rose slightly. The Labor Department said weekly jobless claims (i.e. the number of Americans applying for jobless benefits) slid by -19,000 to 457,000 in the week ended June 19. Elsewhere, the Commerce Department said durable goods, goods meant to last at least three years, excluding autos and aircraft, rose in May for the third time since February 2010. However, the overall reading was down -1.1%. The fact that the major averages sold off on the news suggests investors were not pleased with the results. After the close, both Oracle (ORCL) and Research In Motion (RIMM) posted their latest quarterly results which sent ORCL higher and RIMM lower in after hours trade.

Market Action- Rally Under Pressure:

Technically, the fact that both the Dow Jones Industrial Average and the S&P 500 Index continue falling after closing below their respective 200-day moving average (DMA) lines earlier this week suggests the market may retest its recent lows. Looking forward, the 50 DMA line may act as stubborn resistance and this month’s lows should act as support. Since the June 15, 2010 follow-through day (FTD), this column has steadily noted the importance of remaining very selective and disciplined because all of the major averages are still trading below their downward sloping 50-day moving average (DMA) lines. This week’s sell-off simply confirms that view. Trade accordingly.
Are You Ready For A Change?
Inquire Today About Our Professional Money Management Services:
If your portfolio is greater than $250,000 and you would like a free portfolio review, 
Click Here to learn more about our money management services.   * Serious inquires only, please.

Similar Posts

  • Dollar Falls; Stocks & Commodities Up

    Thursday, November 4, 2010 Stock Market Commentary: Stocks and commodities soared as the US dollar fell one day after the Federal Reserve announced a second round of quantitative easing. Volume patterns remain healthy as the major averages are now in their 10th week of their ongoing rally.On average, market internals remain healthy evidenced by an…

  • Day 1 Of A New Rally Attempt

    Wednesday marked Day 1 of a new rally attempt which means that the earliest a possible follow-through day (FTD) could emerge will be Monday. However, if at anytime, Wednesday’s lows are breached then the day count will be reset. The technical action in the major averages and the latest round of economic data bodes poorly for the market and the global recovery. Currently, resistance for the the major averages are their 50 DMA lines, then their longer term 200 DMA lines while support remains July’s lows. It is also disconcerting to see the action in several leading stocks remain questionable as evidenced by the dearth of high-ranked leaders breaking out of sound bases. Monday’s negatively reversal coupled with Tuesday’s ugly distribution day effectively ended the latest rally attempt. This emphasizes the importance of remaining cautious until the rally is back in a confirmed uptrend. Put simply, we can expect this sideways/choppy action to continue until the market breaks out above resistance or below support. The first scenario will have bullish ramifications while the second will be clearly bearish. Trade accordingly.

  • Flight To Safety; Stocks & Commodities Plunge As Dollar Soars!

    The market is currently in a correction which, according to historical precedent, suggests 3 out of 4 stocks will follow the market lower until a new follow-through day emerges. That said, taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting in trouble. It is also important to note that the major averages have experienced multiple “corrections” since the March 2009 lows and each one has been mild at best (less than a -10% decline from the recent high). Therefore, it will be very interesting to see how low this correction goes before the bulls show up and defend support. Additionally, it is important to note that the market can go much lower (or higher) than anyone thinks; so it is of the utmost importance to filter out the “noise” and carefully analyze price and volume action of the major average for the best read on the health of the market. It will be very interesting to see how the market reacts to Friday’s nonfarm payrolls report slated to be released 8:30am EST.

  • Stocks Bounce On A Busy Wednesday

    Stocks slid on Monday and Tuesday but the bulls showed up on Wednesday and quelled the bearish pressure. However, several leading stocks sold off hard, and negated their latest breakouts earlier in the week, which reiterates the importance of remaining selective as investors attempt to figure out how earnings season will unfold. It is important to note that the current 45-week rally remains intact as long as the major averages continue trading above their respective 50-day moving average (DMA) lines. Until those levels are breached, the bulls deserve the benefit of the doubt.

Leave a Reply

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