Stocks React To Earnings & FOMC Minutes

Wednesday, May 18, 2011
Stock Market Commentary:

Stocks and a host of commodities rebounded after a sharply three day sell off. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.

Q1 Results & FOMC Minutes:

Before Wednesday’s open, a slew of high profile companies (DELL, DE, TGT, among others) released their Q1 results which largely topped analyst estimates. At 2pm EST, the Federal Reserve Open Market Committee (FOMC), released the minutes of their latest meeting which largely reiterated their recent stance that the economy is improving while inflation pressures are largely short-term in nature. According to the Stock Trader’s Almanac, there is some truth to the old adage, “Sell in May and Go Away. On average, the Dow Jone Industrial Average has rallied +7.4% during the period of November 1 through April 30 since 1950 (post WWII). The data also shows that the Dow Jones Industrial Average has only risen by +0.4% between May 1 and October 31. Further analysis of the data shows that the worst six-month periods in the market’s post WWII history have occurred between May-November (2010, 2008, 2002, and 2001, to name a few).
Market Outlook- Rally Under Pressure
From our point of view, the market rally is under serious pressure which suggests caution is paramount at this juncture.  Looking forward, the next level of support for the major averages are their respective 50 DMA lines and resistance is their 2011 highs. The rally remains in tact as long as support holds on a closing basis. If you are looking for specific help navigating this market, please contact us for more information.

Want Better Results?

You Need Better Ideas!

We Know Markets!

Learn How We Can Help You!

 

Similar Posts

  • Japan's Credit Cut & Durable Goods Top Estimates

    Market Outlook- New Rally Confirmed!
    The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. This action suggests a subtle and bullish shift may be on the horizon. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

  • Stocks Tank As Correction Take Hold

    The market is currently in a correction which, according to historical precedent, suggests 3 out of 4 stocks will follow the market lower until a new follow-through day emerges. That said, taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting in trouble. It is also important to note that the major averages have experienced multiple “corrections” since the March 2009 lows and each one has been mild at best (less than a -10% decline from the recent high). Therefore, it will be very interesting to see how low this correction goes before the bulls show up and defend support. Additionally, it is important to note that the market can go much lower (or higher) than anyone thinks; so it is of the utmost importance to filter out the “noise” and carefully analyze price and volume action of the major average for the best read on the health of the market.

  • Russell 2000 Hits Fresh Record High!

    Market Action-Confirmed Uptrend
    The market is back in a confirmed uptrend after a modest (and healthy) -6% correction from its post-recovery highs. We find it very bullish to see the mid cap S&P 400 index hit a fresh all time high and the small cap Russell 2000 index flirt with its all time high. in addition, the Dow Jones Industrial Average vaulted to a fresh post-recovery high and the S&P 500 and Nasdaq composite are just shy of fresh 2011 highs! Finally, we are very happy to see a slew of high ranked stocks trigger fresh technical buy signals in recent weeks which suggests higher, not lower prices lie ahead. If you are looking for specific help navigating this market, please contact us for more information.

  • Stocks & Commodities Rally; US Dollar Plunges

    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.