Thursday, January 12, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets were mixed on Thursday after the Bank of England and European Central Banks (ECB) both held rates steady at their latest meeting. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line (shown above). Looking forward, the next area of resistance remains Q4’s highs (~1292) and then 2011 highs near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above  its 200 DMA line.

ECB & BOE Meet & U.S. Economic Data Fails To Impress!

Before Thursday’s open, investors digested a slew of data. Overseas, The Bank of England held rates steady and said they would not print more money in the foreseeable future which was a backhanded vote of confidence for their economy. Meanwhile, the ECB also held rates steady which put pressure on European politicians to resolve their ballooning debt crisis. Spain and Italy both held successful bond auctions which helped alleviate fears. U.S. economic data failed to impress. First, weekly jobless claims topped estimates and rose by +24,000 to a seasonally adjusted 399,000 which was the highest level in six weeks and very close to the closely followed 400,000 mark. The four-week average also jumped to 381,750 from 374,000 in the prior week. Separately, the Commerce Department said retail sales rose +0.1% last month which fell short of the Street’s estimate for a gain of +0.3%. It was also the weakest reading in seven months. Finally, the Commerce Department said businesses inventories grew by +0.3% in November.

Market Outlook- New Rally Confirmed

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1260). Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!