Thursday, March 03, 2011
Stock Market Commentary:

Stocks surged on Thursday after Jean-Claude Trichet, head of the European Central Bank (ECB), hinted that he may raise rates next month to curb inflation, a slew of large retailers reported positive comps, weekly jobless claims fell, and the ISM service index topped estimates. The current crisis in the Middle East remains in flux which is putting upward pressure on oil and gold and downward pressure on equities. The benchmark S&P 500 is up nearly 100% from its March 2009 low, and still about -16% off its all time high from October 2007. On average, market internals remain healthy as the major averages bounced after finding support near their respective 50 DMA lines in late February.

Trichet, Retail Comps, Weekly Jobless Claims, ISM Service Index:

Before Thursday’s open, European Central Bank President Jean-Claude Trichet held rates steady at 1% and said the ECB may raise interest rates in April to curb inflation. This sent the euro higher and the USD lower.  A slew of large U.S. chain stores released stronger-than-expected monthly comps which bodes well for retail sales and the ongoing economic recovery. The Labor Department said weekly jobless claims slid by -20,000 which brought the weekly total down to 368,000. Finally, the ISM released its service index which also topped estimates.

Market Action- Rally Confirmed; Week 27

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November, January, and late February and early March. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. If you are looking for specific high ranked ideas, please contact us for more information.

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