Tuesday, March 15, 2011
Stock Market Commentary:
Japan’s benchmark Nikkei index plunged another -10% on Tuesday as the country struggles to contain the effects of Friday’s devastating earthquake and low levels of radiation were found in Tokyo! The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines on heavy turnover. The current crisis in the Middle East remains in flux which is putting upward pressure on oil and gold and downward pressure on equities. The benchmark S&P 500 has steadily fallen after briefly being up 100% from its March 2009 low, and still about -18% off its all-time high from October 2007.
Nuclear Threat Spreads In Japan & U.S. Fed Meeting:
On Tuesday, the Japanese prime minister Naoto Kan warned that radiation may spread from the devastating earthquake that crushed a nuclear power plant outside of Tokyo. This sent Japan’s benchmark stock exchange, the Nikkei index, plunging a whopping -10%! Additionally, the Nikkei sufferred its worst two day decline (-16%) since 1987. This ominous action sent a slew of stocks and commodities lower across the globe as fear of demand destruction (i.e. slower economic growth) overshadowed other ongoing headlines. Elsewhere, stock futures in the U.S. cut their losses after NY manufacturing accelerated in March to the fastest rate in nine months. The Federal Reserve Bank of New York’s general economic index jumped to 17.5 from 15.4 last month. This easily topped the Street’s estimate of 16.1. Finally, the Federal Reserve concluded its latest meeting and decided to hold rates steady near historic lows to spark economic growth.
Market Action- Market In A Correction; 28-Week Rally Ends
All the major averages sliced below their respective 50 DMA lines on Thursday, March 10, 2011. Then, on Friday, all the major averages except for the tech-heavy Nasdaq composite managed to repair that damage and close above their respective 50 DMA lines which was somewhat encouraging and marked Day 1 of a new rally attempt. However, Friday’s lows were promptly breached on Monday as all the major averages dove below their 50 DMA lines on heavy volume. This ominous action reset the day count and reiterates the importance of raising cash and playing strong defense until a new FTD emerges. If you are looking for specific help navigating this market, please contact us for more information.