The Bulls Are Strong!

The bulls flexed their muscles today and sent the major averages higher even as the US dollar rallied! Volume, a critical component of institutional demand, was lower than Monday’s levels which indicated a lack of buying from the institutional crowd. However, the fact that the major averages were down for most of the session and closed near their intra day highs helped offset that concern.

Follow The Leaders

The major averages managed to close above near term support (formerly resistance) as the bulls continue to control this market. Most liquid leaders advanced today which reiterates the importance of keeping a close eye on the leaders. The universe of high ranked leading stocks remains uncomfortably thin which is exactly how this market has been performing since the March lows.

Economic Data:

Turning to the economic front, inflation concerns eased after the government released a weaker than expected producer price index (PPI). The headline reading increased +0.3% last month after sliding -0.6% in September. October’s reading was lower than the Street’s estimate of a +0.5% rebound. However, the “big” news in the report was that the core rate, which excludes food and energy, unexpectedly fell -0.6%, following a -0.1% decline in September. This was lower than the Street’s forecast for a +0.1% gain which helped allay inflation concerns. A separate report showed that the country’s manufacturing sector continued to grow, albeit at a very slow rate. At 1:00pm EST, the National Association of Home Builders released their housing market index which was unchanged at 17 in November and gave investors some clue on how housing starts will fare when the government releases that report tomorrow.