Thursday, October 20, 2011
Stock Market Commentary:

Stocks were relatively quiet on Thursday as investors digested the latest round of earnings and economic data. Stocks confirmed their latest rally attempt on Tuesday day 12 of their rally attempt when the S&P 500 and NYSE composite scored proper follow-through days (FTD).  It is important to note that every major rally in history began with a FTD but not every FTD leads to a new rally. That said, one can proceed with caution as long as the major averages remain above their 50 DMA lines. The next important area of resistance is their September highs and then their 200 DMA lines. We would be remiss not to note that several key risk assets (multiple stock markets around the world, Copper, Crude Oil, etc.) officially entered bear market territory over the in recent months which bodes poorly for U.S. stocks and the global economy.

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Earnings Mixed, Riots In Athens, & Economic Data Does Not Disappoint:

The latest round of earnings data was mixed which largely echoed what we have seen this week from corporate America. Greek citizens rioted for the second day as their government votes on the latest round of austerity measures. A large meeting is planned in Europe this weekend to help resolve their ongoing debt woes. In the U.S., the economic data was mixed. The Labor Department said weekly jobless claims  slid by -6,000 to 403,000 which topped the decline of -4,000 expected on Wall Street. The Philly Fed index, which measures manufacturing activity in the Mid-Atlantic region, rose to +9.7 in October which is the highest reading since April and topped the +9.0 forecast.  Meanwhile, leading indicators rose +0.2% last month for its fifth consecutive gain but fell short of the +0.3% forecast.  Finally, the National Association of Realtors said existing home sales slid -3% to an annual rate of +4.91 million last month which also topped estimates.

Market Outlook- Confirmed Rally:

The major U.S. averages are back in a new confirmed rally and are flirting with resistance of their current 2.5 month base. The benchmark S&P 500 index scored a proper FTD on Tuesday, October 18, 2011, i.e. Day 12,  when it rallied over 2% on heavier volume than the prior session. The next important area of resistance is September’s highs and then the 200 DMA line. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.

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On Tap This Week:
FRIDAY: Fed’s Kocherlakota speaks, 2011 Dodd-Frank Rulemaking Deadline; Earnings from GE, McDonald’s, Verizon, Honeywell and Schlumberger
Source: CNBC.com