Stocks Take A Breather After G20 Meeting

XHB- Old Chart Highs Become Support
XHB- Old Chart Highs Become Support

Monday, February 27, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets ended mixed after the G-20 concluded said that European countries should sort their finances out on their own. 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. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line. Leadership continues to improve which is another healthy sign

G-20 Does Not Rescue Europe; Pending Home Sales Surge In The U.S.:

Over the weekend, the G-20 concluded their latest meeting in Mexico and told European leaders that they need to resolve their fiscal woes on their own. Initially, this put a little pressure on equities and other risk assets and added pressure on Germany, Europe’s largest economy, to save the so-called PIIGS. Euro zone countries are going to reassess the strength of their bailout fund in March. Until then, the ECB’s LTRO program appears to be picking up the slack. In the U.S., pending home sales surged +8.0% vs. January 2011 and hit a two-year high. Again, as we have said several times in this column, housing stocks appeared to have bottomed and look great here.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. All this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought. As always, keep your losses small and never argue with the tape. 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!

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