Stocks Rally On Healthy Earnings & Economic Data

Wednesday, April 14, 2010
Market Commentary:

The major averages jumped above important physcological resistance levels after a slew of stronger than expected earnings and economic data were released. Volume totals on the NYSE and on the Nasdaq exchange were reported higher compared to Tuesday’s totals which suggests increased institutional sponsorship. Advancers trumped decliners by over a 3-to-1 ratio on the NYSE and by nearly a 4-to-1 ratio on the Nasdaq exchange. New 52-week highs trumped new lows on both exchanges and new highs on the NYSE hit the highest level since January 2004! There were 86 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, nicely higher than the 46 issues that appeared on the prior session.  A healthy crop of new leaders making new highs bodes well for any market rally, so the recent expansion in leadership has been a welcome improvement.

A Slew of Healthy Earnings Lifts Stocks:

Intel Corp (INTC), JP Morgan Chase & Co (JPM) and railroad giant CSX Corp. (CSX) all topped estimates and reported solid Q1 results. All three stocks gapped up on Wednesday which helped the benchmark S&P 500 and the tech-heavy Nasdaq composite close above their psychologically important resistance levels for the first time since September 2008 (when Lehman failed). At this point, all the major averages have closed above their latest important psychological resistance levels: Dow Jones Industrial Average topped 11,000, the S&P 500 surpassed 1,200, and the Nasdaq composite closed above 2,500 which bodes well for this 7-week rally.  

Healthy Economic Data Also Lifts Stocks:

The consumer price index was very mild and below expectations which suggests inflation remains tame as the economy continues to recover. Retail sales jumped in March which helped a slew of retailers hit fresh 52-week highs. Elsewhere, the Fed released its Beige Book which showed the economy continues to improve across much of the nation. Economic data from Asia was also positive: Korea reported a large drop in unemployment, Singapore reported strong GDP growth in Q1 and many believe China will report a large increase in GDP when they report their numbers on Thursday. The one negative data point was that US mortgage applications tanked which reiterates how fragile the ailing housing recovery is. However, it was very encouraging to see a slew of housing stocks surge in recent weeks and months which reiterates our bullish stance on housing.

Market Action- Confirmed Rally:

The benchmark S&P 500 Index currently has 5 distribution days while the Nasdaq Composite and Dow Jones Industrial Average have 4 since the March 1, 2010 follow-though-day (FTD). These distribution days have not been damaging which is a welcomed sign. Trade accordingly.
Professional Money Management Services- Free Portfolio Review:
Our skilled team of portfolio managers knows how to follow the rules of this fact-based investment system. If your portfolio is greater than $100,000 and you would like a free portfolio review, 
Click Here to get connected with one of our portfolio managers. ** Serious inquires only, please.

Similar Posts

  • Week In Review- 4th Consecutive Weekly Decline! 2.5.10

    Looking at the market, Thursday’s ominous action took out Monday’s lows and effectively ended the brief rally attempt which suggests a steeper correction may unfold and resets the day count for a proper follow-through day to emerge. It is also important to see how the major averages react to their respective 50-day moving average (DMA) lines which were support and are now resistance. Until they all close above that important level the technical damage remaining on the charts is a concern. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data. Remember that the recent series of distribution days coupled with the deleterious action in the major averages suggests large institutions are aggressively selling stocks. Disciplined investors will now wait for a new follow-through day to be produced before resuming any buying efforts. Until then, patience is paramount. Our readers know that our defensive stance is not new- we have been defensive since January 23, 2010!

  • Stocks Rally On New Bank Rules

    Monday’s action was a strong sign for the market rally that began on the September 1, 2010 follow-through day (FTD). Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. It was encouraging to see a flurry of high-ranked leaders trigger fresh technical buy signals and break out of sound bases in recent sessions. The next important level to watch for the major averages are their respective 200-day moving average (DMA) lines. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

  • Stocks End Mixed Ahead Of Jobs Report

    So far, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been very strong and stocks are simply pausing to consolidate their recent gains. It was encouraging to see the bulls show up and defend support (formerly resistance) in recent weeks. The next level of support for the major averages is their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. Trade accordingly.

  • Day 7: Light Volume Fails To Confirm The Latest Rally Attempt

    Tuesday, February 16, 2010 Market Commentary: The major averages ended higher after the latest round of stronger than expected economic and earnings data was released. Volume, a critical indicator of institutional sponsorship, was lower than the prior session on both exchanges which prevented the major averages from producing a sound follow-through day.  Advancers trumped decliners by…

  • Volume Lighter Than Friday; No FTD!

    Market Outlook- Market In A Correction
    The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Analysis?
    Global Macro Research?
    Learn How To Follow Trends!

Leave a Reply

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