Tuesday, April 19, 2011
Stock Market Commentary:
Stocks edged higher on Tuesday as they tried to recover from Monday’s shellacking. From our vantage point, the current rally which began on the Thursday, March 24, 2011 follow-through day (FTD) came under pressure at the beginning of April and officially ended on Monday, April 18, 2011, when all the major averages plunged below their respective 50 DMA lines in heavy trade. Now that the market is back in a correction, defense is paramount until a new FTD emerges.
Goldman Sachs & Housing Data Top Estimates
Before Tuesday’s open, investment powerhouse, Goldman Sachs (GS) reported Q1 results which topped the Street’s estimates. However, earnings were down -22% from the same period in 2010 while sales slumped by -5%. The stock opened higher higher but quickly reversed and traded lower as it continues falling further and further below its 50 & 200 day moving average lines. In addition, according to IBD, Goldman’s EPS rating has plunged to 13 (99 is the highest possible rating) while its relative strength rating has tanked to only 22 (99 is the highest possible rating) which indicates weakness, not strength.
In other news, housing starts rose in March but are still at deeply depressed levels. Housing starts rose +7.2% last month, following a monthly -18.5% decline in February. Housing stocks are among the worst performing industry groups as the broader housing market continues to suffer.
Market Action- Market In A Correction
From our point of view, the current rally which began with the Thursday, March 24, 2011 FTD officially ended on Monday, April 18, 2011 after all the popular indexes sliced below their respective 50 DMA lines. The market is now in a correction which reiterates the importance of playing strong defense until a new rally is confirmed. If you are looking for specific help navigating this market, please contact us for more information.