SPX - A New Rally Is Confirmed
Tuesday, January 03, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets rallied on the first full trading day of 2012 as hope spread that the global economy will recover despite the ongoing mess in Europe. Investors are hopeful that 2012 will be a better year for U.S. equities and risk assets than 2011 or 2010. 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.
Economic Data Helps Stocks:
On Monday, all markets in the U.S. were closed in observance of New Year. Stocks opened higher on Tuesday which was the first full trading day of 2012. News on the economic front helped the risk on story. PMI data from China and Europe were positive which helped offset concerns of an economic slowdown. In the U.S.. manufacturing data accelerated in December, rising to 53.9 which topped the Street’s estimate of 53.2. A separate report released by the Commerce Department showed that construction spending rose +1.2% in November which was the highest level since June 2010.
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 (downward trendline and 200 DMA line). 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!