Monday, December 28, 2009

Market Commentary:

Stocks rallied around the world as the US dollar fell after stronger than expected economic data was announced from China and Japan. Volume, an important indicator of institutional sponsorship, was lighter than Wednesday’s levels, again revealing the lack of appetite for accumulating shares from very large and influential institutional investors. Advancers led decliners by nearly a 3-to-1 ratio on the NYSE and by nearly a 2-to-1 ratio on the Nasdaq exchange. There were 62 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, one less than the total of 63 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Strong Economic Data From China & Japan:

Overnight, a stronger-than-expected report was released from China which showed that fourth quarter GDP would top 10% and its full year economic growth would reach +8.3%, which also topped views. China, one of the fastest growing economies in the world, has enjoyed robust growth for much of this decade thanks to a favorable labor market, a pegged currency, and its strong competitive advantages. The China Construction Bank (CCB) released the report and cited rising exports and increased domestic consumption as the two primary sources for the stronger than expected forecast. The Japanese government released a stronger-than-expected economic report which showed that industrial output rose +2.6% last month. November’s reading was the the ninth consecutive monthly gain and beat the Street’s estimate for a +2.4% increase.

Bank of Israel Raises Rates:

Elsewhere, the Bank of Israel raised its benchmark interest rate for a third time since the global economy began to recover earlier this year. The Israeli central bank said that economic growth has accelerated sharply in recent quarters which, in turn, has caused inflation to exceed the government’s target range. In case you did not know, currently, the Israeli central bank is one of the most hawkish central banks in the world as they continue to raise rates even in the face of a potential double dip recession.

Holiday Shopping Estimates Up +3.6%:

Preliminary results show that US retail sales rose +3.6% this holiday season when compared to the 2008 holiday shopping season. One extra shopping day coupled with a last minute surge in purchases the week before Christmas helped produce the stronger than expected results. MasterCard Advisors’ SpendingPulse released the findings and are usually considered a good proxy of consumer spending. It is important to note that according to the National Retail Federation, the 2008 season was the worst in four decades. Many economists believe that the US economy, the world’s largest, will grow by +3.5% in 2010 thanks to a weak dollar and a rebounding jobs market. If that were to occur, that would be the best performance since 2004 as spending increases and companies increase investments.

Market Action: Price and Volume

Looking at the market, the action remains healthy. The Dow Jones Industrial Average, small cap Russell 2000 index, S&P 500 and Nasdaq composite are all trading near fresh 2009 highs. Leaving the NYSE composite just below its 2009 high. The fact that the market managed to rally last week and hit new highs in the face of disconcerting economic data and a stronger dollar is a very healthy sign. Ideally, one would like to see leadership and volume expand over the next few weeks as the major averages continue advancing.