Tuesday, June 21, 2011
Stock Market Commentary:
Stocks and a slew of commodities ended higher as investors awaited the Greek confidence vote. Tuesday marked day 4 of a new rally attempt for the major averages. Upon further review, even though the Nasdaq composite ended lower on Thursday, it was in the upper half of its range which marked Day 1 of a new rally attempt for that index as well as the other popular averages. Tuesday’s robust action in the Nasdaq composite and the small-cap Russell 2000 index confirmed the current rally attempt for the major averages and suggests the bulls are now back in control of this market; as long as the 200 DMA line holds.
Existing Home Sales, Fed Meeting & Greek Confidence Vote:
The Federal Reserve began its much anticipated two-day meeting on Tuesday. The Street expects the FOMC to hold rates steady but will be looking closely at the after meeting commentary for signs of a change in policy. At 10 AM EST, existing home sales fell -3.8% in May to a 4.81 million annual rate in May. After Tuesday’s close, the Greek Prime Minister won the much anticipated confidence vote.
Market Outlook- Confirmed Rally:
The market produced a sound follow-through day (FTD) on Tuesday, June 21, 2011 which confirmed the latest rally attempt. Looking forward, this rally will remain intact as long as the major averages continue trading above their respective 200 DMA lines and their recent chart lows. It was encouraging to see the bulls show up and defend the longer term 200 DMA line in the middle of June which is the latest level of support. The next level of resistance for the major averages is their respective 50 DMA lines.
For those of you that are interested, the S&P 500 hit a new 2011 high on May 2, 2011. Two days later, on Wednesday, May 4, 2011, we turned cautious and said “The Rally Was Under Pressure” (read here). Then on Monday, 5.23.11, we changed our outlook to “Market In A Correction” (read here). On Monday, June 6, 2011 we pointed out that the S&P 500 violated its 9-month upward trendline (read here) and reiterated our cautious stance. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. If you are looking for specific help navigating this market, please contact us for more information.