Monday, January 24, 2011
Stock Market Commentary:
The major averages rallied as the dollar fell to a fresh two month low. The current 22-week rally remains under pressure after the major averages negatively reversed from a new recovery high and closed lower on Wednesday January 19, 2011. This ominous action, especially after a big move and from a new high, suggests a subtle change in trend may be on the horizon. We are shifting our stance from capital appreciation mode; to capital preservation (i.e. we are locking in gains and tightening stops to protect from further downside deterioration).
Earnings Are Strong:
Stocks rallied after the latest round of solid earnings data was released. So far, over 70% of the companies in the S&P 500 that have released numbers have topped estimates which is an encouraging sign. President Obama is slated to give his State of the Union Speech Tuesday evening which will summarize the recent events and lay out his plan for the next two years.
Later this week, the Commerce Department is slated to release initial Q4 GDP numbers. Economists believe U.S. gross domestic product probably rose at a +3.5% annual pace, up from a +2.6% rate in the third quarter. Consumer sentiment and durable goods are also slated to be released later this week.
Market Action- Market In Confirmed Rally; Week 22
It was encouraging to see the bulls show up in November and defend the major averages’ respective 50 DMA lines. The market remains in a confirmed rally 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. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.