Stocks Erase 2011 Gains; Day Count Reset

Wednesday, June 15, 2011
Stock Market Commentary:

Stocks and a slew of commodities were smacked on Wednesday, effectively giving back all of Monday & Tuesday’s gains and turned lower for the year after inflation jumped in the U.S. and the latest round of economic data was tepid. Remember, it is quite normal to see markets “bounce” after a steep decline. Going forward, the key is to study the “bounce” and wait for a powerful up day (follow-through day) to confirm a new rally attempt. Now that Monday’s lows (Day 1) are breached, the day count is reset and the possibility of a proper FTD is off the table until we get a new “up” day and restart the day count. Until a new FTD emerges, the bears remain in control of this market. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly as all the major averages and a slew of key commodities are down significantly from their May 2011 highs.

Inflation Jumps; Economic Data Disappoints:

Before Wednesday’s open, the Labor Department reported a mixed to higher reading in their closely followed consumer price index (CPI). Headline CPI rose a seasonally adjusted +0.2%, down from +0.4% in April but topped estimates for an unchanged reading. Core prices, which exclude food and energy, experienced their largest gain in nearly three years, rising +0.3%. May’s reading topped the median forecast and April’s reading of +0.2%. The data shows inflation is accelerating in other areas of the economy, not just food & energy, which is not ideal.
Other economic data reaffirmed the notion of a massive slow-down in the U.S. economy. The empire state manufacturing survey fell for the first time since November 2010 and came in way below estimates. General business conditions in the NY area tumbled -20 points to -7.79 in June. The Street was expecting a positive reading of 12. Not only was the “miss” large, it was also below the all important boom/bust level of zero.   A separate report showed industrial production modestly increased in May but did little to impress the Street. Overall industrial production edged up +0.1%, following an unchanged reading in April. The report also “missed” estimates for a +0.2% gain. It was also disconcerting to see that the National Association of Home Builder’s sentiment survey plunged three points in June to 13, which is the lowest level since September 2010!

Market Outlook- Market In A Correction:

From our point of view, the market is back in a correction now that all the major averages closed below their respective 50 DMA lines and important upward trendlines. Since the beginning of May, we have urged our clients and readers to be extremely cautious as the major averages and a host of commodities began selling off. Looking forward, the next level of resistance for the major averages is their recent lows (i.e. 1294 in the S&P 500) and then their respective 50 DMA lines. The next level of support is their longer term 200 DMA lines and then their March 2011 lows.
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. We have received a lot of “thank you” emails for being “spot on” in our cautious approach. We are humbled by your presence and very thankful for your continued support. If you are looking for specific help navigating this market, please contact us for more information.

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Stocks Slide on Tepid Economic Data

Tuesday, May 17, 2011
Stock Market Commentary:
Stocks and a host of commodities fell after the latest round of tepid economic and earnings data was released. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.

Q1 Economic Results, Housing Starts, & Industrial Production:

Before Tuesday’s open a slew of high profile companies released mixed-to-lower Q1 results and the latest economic data missed estimates. The Commerce Department said housing starts (a.k.a. new homes being built), fell -11% from March and missed the Street’s estimate of 569,000. Work began at an annual pace of 523,000 houses last month. The report showed that building permits, a sign of future construction, also fell. This was the latest in a series of dissapointing data from the ailing housing market. A separate report showed that industrial production was unchanged in April which fell short of the Street’s estimate for a +0.4% increase.

Market Outlook- Rally Under Pressure

From our point of view, the market rally is under serious pressure which suggests caution is paramount at this juncture.  Looking forward, the next level of support for the major averages are their respective 50 DMA lines and resistance is their 2011 highs. The rally remains in tact as long as support holds on a closing basis. If you are looking for specific help navigating this market, please contact us for more information.

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S&P 500 Up 100% From March 2009 Low!

Wednesday, February 16, 2011
Stock Market Commentary:
Stocks rallied on Wednesday after the latest round of economic, earnings, & M&A news were released. The benchmark S&P 500 is up 100% from its March 2009 low! The benchmark S&P 500 is up 100% from its March 2009 low! On average, market internals remain healthy as the major averages continue marching higher. The fact that the major averages bounced back sharply after a very brief pullback in January illustrates how strong this 25-week rally actually is.

Housing Starts, PPI, and Industrial Production:

After Tuesday’s close, Dell (DELL), the world’s second largest computer manufacturer said earnings and revenue easily topped estimates. This set the stage for a healthy rally in a slew of tech stocks. The news on the M&A front was also healthy as Sanofi-Aventis (SASY.PA) said it plans to acquire Genzyme (GENZ) for $20.1 billion in cash and activist investor Nelson Peltz’s Trian Group offered to acquire Family Dollar Stores Inc (FDO) for $55 to $60 per share in cash or $7.6 billion.
Housing construction was mixed last month and remained at a very weak levels. Starts advanced while permits fell back. Housing starts rose +14.6% after falling -5.1% in December. Elsewhere, the producer price index (PPI) rose which suggests inflation is accelerating. The headline number rose +0.8%, matching the median forecast. Core prices, which strip out food and energy, rose +0.5% which topped the Street’s estimate for a +0.2% gain. If inflation continues to accelerate, the Fed will have more pressure to raise rates sooner than expected. A separate report showed industrial production falling to 5.2% from 6.3% in December. At 2pm EST, the FOMC released the minutes of its latest meeting which largely reiterated their recent support for QE II.

Market Action- Confirmed Rally; Week 25 Begins

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

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Stocks End Mixed Ahead Of Fed Meeting

Monday, March 15, 2010
Market Commentary:

The major averages ended mixed as concern spread that China and India may begin seeking measures to curb their robust economies as inflation picks up. Compared to the prior session, volume fell on the NYSE and Nasdaq exchange. Decliners led advancers by a 11-to-8 ratio on the NYSE and by a 16-to-11 ratio on the Nasdaq exchange. There were 43 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, down from the 58 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

US Dollar Up; Stocks & Commodities Mixed:

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Earnings Season Begins Stocks; Stocks Fall

Friday, January 15, 2010
Market Commentary:

It was disconcerting to see all the major averages negatively reverse on heavier volume than the previous week as investors digested a slew of economic and earnings related data. The heavier volume reversal for the major averages suggests that large institutions were aggressively selling, not buying, stocks. However, it was encouraging to see new 52-week highs still solidly outnumber new 52-week lows on the NYSE and on the Nasdaq exchange which is a welcomed sign.

Monday & Tuesday:

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