7-Week Rally Ends; Market In A Correction

Friday, August 27, 2010
Stock Market Commentary:

The seven week rally that began on the July 7, 2010 follow-through day (FTD) ended on Tuesday after the latest round of dismal economic data dragged stocks lower. For the week, stocks ended lower but near their highs after a strong advance on Friday. Friday’s volume totals ended higher on the NYSE and the Nasdaq exchange compared to Thursday’s levels which suggested that large institutions were aggressively buying stocks. Advancers trumped decliners by over a 4-to-1 ratio on the NYSE and on the Nasdaq exchange. New 52-week highs outnumbered new 52-week lows on the NYSE but trailed new lows on the Nasdaq exchange. There were 21 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, higher than the 10 issues that appeared on the prior session.

Monday & Tuesday’s Action; Stocks Fall on Dismal Economic Data:

The major averages negatively reversed (opened higher but closed lower) on Monday after encountering resistance near their respective 50-day moving average (DMA) lines. Stocks slid on Tuesday after existing home sales tanked, the 10-year Treasury yield plunged to the lowest level in 17 months, and the yen rose to the highest level versus the dollar since 1995. Overnight, stocks in Asia and Europe fell after the yen jumped to a 15-year high against the dollar and Treasury rates slid to their lowest level since the March 2009 bottom. This put pressure on US futures and set the stage for a weak open. The “big” headline of the day occurred when the National Association of Realtors said existing home sales slid by -27.2% to a 3.83 million annual rate in April. The outsized decline was attributed to a high unemployment rate and slowing economic data. This was also the lowest reading in a decade and lower than the worst estimate on Wall Street.

Wednesday-Friday’s Action; Day Count Reset:

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