Stocks Rally On Economic Data

Gold Hit A New 2011 Low & Is Officially In A Bear Market

Gold Hit A New 2011 Low & Is Officially In A Bear Market

Thursday, December 29, 2011
Stock Market Commentary:

Stocks opened higher after the latest round of economic data was announced and an Italian bond auction came in below the worst case scenario that many pundits were worried about. From our point of view, Thursday marked Day 7 of the current rally attempt which means the window is now open for a new follow-through day to emerge [as long as Tuesday’s (12/20/11) lows are not breached]. The benchmark S&P 500 index continues flirting with positive territory for the year and its 200 DMA line.

Italian Bond Auction, Jobless Claims, & Pending Home Sales:

On Thursday, stocks opened higher as investors digested a host of economic data. Italy managed to sell 7.02 billion euros ($9 billion) of bonds which missed their target but borrowing costs fell which helped allay concerns regarding the health of the Italian government to finance the world’s fourth largest debt-load. In the U.S., the labor department said weekly jobless claims rose by 15,000 to a seasonally adjusted 381,000 but remained under the closely followed 400,000 level for the fourth straight week. The report was a little worse than the Street’s expectations for 375,000. Elsewhere, pending home sales rose by +7.5% in November which easily topped the Street’s estimate and is the highest level in 19 months.

Market Outlook- In A Correction

Risk assets remain under pressure as gold continues trading below its 200 DMA line and other capital markets continue to fall. We find it very disconcerting to see other (leading) risk assets flirt with fresh 2011 lows in recent weeks. China’s Shanghai Composite (normally a leading risk on/off indicator) has fallen below its October low and hit a new 2.5 year low. The euro, which is strongly correlated to U.S. stocks and other risk assets also took out its October low on Tuesday (12/13) which is not ideal. Meanwhile, Gold sliced below its longer term 200 DMA line on on Wednesday (12/14) for the first time since August 2008 (1-month before Lehman failed) and remains below that critical level. Other risk assets such as Oil, Silver, Copper, etc are also under pressure which suggests the global risk off trade is getting stronger.  As an easy reference point, if the benchmark S&P 500 would simply fall to its Oct low, that would be 1074! Sometimes, caution is king.
What we have seen from the October 4, 2011 low was simply an over sold bounce into a logical area of resistance (200 DMA line). 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!

Dollar Falls; Stocks & Commodities Up

Thursday, November 4, 2010
Stock Market Commentary:

Stocks and commodities soared as the US dollar fell one day after the Federal Reserve announced a second round of quantitative easing. Volume patterns remain healthy as the major averages are now in their 10th week of their ongoing rally.On average, market internals remain healthy evidenced by an upward sloping Advance/Decline line and the fact that new 52-week highs continue to easily outnumber new 52-week lows on both exchanges.

Dollar Falls; Stocks & Commodities Up:

It is important to note that the euro was trading at 139 before the Fed announced QE 2. One day later, it topped 142 which sparked a broad based rally in dollar denominated assets (mainly stocks and comnmodities). Overnight, stocks soared in Asia and Europe which set the stage for a strong rally in the US. Stocks shrugged off a weaker than expected weekly jobless claims and opened with sizable gains as buyers showed up and bid prices higher. .

Don’t Fight The Fed:

It appears the positive scenario I described yesterday is unfolding and all I can say is Do Not Fight The Fed. Embrace it, and remember that all the ingredients that sent the benchmark S&P 500 vaulting 83% since March 2009 are still in play, if not stronger now (an additional $600B will be added to “help” the system). That said, the USD is falling hard and the inverse relationship appears to be back on track. As always, use protective stops but one would be wise to err on the bullish side until any of the major averages decide to pullback (it’s only a question of when, not if).

Market Action- Confirmed Rally, Week 10:

Heretofore, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong but the market action has been wide-and-loose which is not a healthy sign. The next level of support for the major averages is their September highs, then their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. We have enjoyed large gains since the September 1st FTD and over the past few weeks, the tape remains somewhat sloppy.  Trade accordingly.

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