Thursday, July 21, 2011
Stock Market Commentary:
Stocks rallied on Thursday after EU leaders announced a new bailout for their debt stricken nations. Technically, it is encouraging to see the major average find support and bounce off their respective 50 DMA lines this week. It is also encouraging to see the major averages on track for a positive reversal (open lower and close higher) for the week. Looking forward, the next level of support are the 2011 lows/the 200 DMA lines and the next level of resistance are the 2011 highs.
New EU Bailout Plan, Economic Data Helps Stocks, & Earnings Continue in Droves
Before Thursday’s open, the euro rallied smartly after Euro-zone leaders proposed a new aid package for Greece and restructured their closely followed rescue fund. The changes are designed to reduce the debt burdens of Greece, Portugal and Ireland and allow the European Financial Stability Facility (EFSF) to charge rates as low as 3.5%. The plan also extends the average maturity of the loans to 7.5-15 years.
In the U.S., the Labor Department said weekly jobless claims rose 10,000 to 418,000 which topped the Street’s estimate for 410,000. The data showed nearly 1,750 additional job cuts due to the Minnesota government shutdown. Stocks added to gains after Leading economic indicators in the U.S. and the Philly Fed survey rose +0.3. The major averages are on track to hit fresh 2011 highs which is a very healthy sign. The latest round of earnings data topped estimates which is another encouraging sign for the market.
Market Outlook- Confirmed Rally
The last week of June’s strong action suggests the market is back in a confirmed rally. As 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 the rally is back in a confirmed rally as all the major averages are now flirting with fresh 2011 highs. Until all the major averages violate their respective 50 DMA lines on a closing basis, the market deserves the bullish benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.