U.S. Stocks; Forming A New Base

Wednesday, August 17, 2011
Stock Market Commentary:

Stocks opened higher on Wednesday as investors across the globe digested France and Germany’s important meeting on Tuesday. In the U.S., the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s (8.16.11) lows hold- there is a strong chance that the markets may be forming a short-term low. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce. Near term resistance remains the 200 DMA line and near term support remains the 2011 lows (last week’s low).

Mortgage Apps Fall & Produce Price Index Jumps!

Before Wednesday’s open, the Mortgage Bankers Association (MBA) said mortgage applications slid by a disturbingly large -9.1%. The report blamed tepid economic conditions and a volatile stock market for the two primary reasons behind the large decline. Separately, the Labor Department said its produce price index (PPI) rose +0.2% despite lower energy prices. Core prices, which exclude food and energy, rose +0.4% which was the largest increase since January and rose +0.3% in June. Since the March 2009 bottom, inflation has remained largely at bay which has helped alleviate pressure on the Federal Reserve to raise rates. However, if inflation swells over the next few quarters than the Fed may be put in a precarious situation; raise rates to curb inflation or leave rates low to stimulate the stale economy?

Market Outlook- Market In A Correction

The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. 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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Dow & Nasdaq Snap A 7-Day Winning Streak; Nasdaq & SP500 Close Below Resistance

Thursday, July 15, 2010
Stock Market Commentary:

US stocks shrugged off earlier weakness and closed near their intraday highs as investors digested a flurry of headlines. Volume was reported mixed compared to Wednesday’s session; higher on the NYSE and lower on the Nasdaq exchange. There were 16 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 28 issues that appeared on the prior session. Decliners trailed advancers by approximately an 18-to-19 ratio on the NYSE but led by a 2-to-1 ratio on the Nasdaq exchange. New 52-week highs solidly outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange.

Investors Digest A Slew of Economic, Earnings & Political Data:

Investor’s digested a slew of data on Thursday: JP Morgan (JPM +0.27%) and Google (GOOG +0.55%) reported their latest quarterly result, weekly jobless claims and producer prices fell, Goldman Sachs (GS +4.43%) settled with the SEC for $550 million, BP (BP +7.57%) plugged the broken well, the Senate sent President Obama the largest financial regulatory bill since the Great Depression, and the latest read on the manufacturing industry was dismal. However, it was somewhat encouraging to see the market shrug off earlier weakness and close near its intraday highs even though the Nasdaq composite and the Dow Jones Industrial Average snapped a 7-day winning streak. It is important to note that both the US dollar and the major averages ended lower on Thursday (in the recent past they tend to move in opposite directions).

Market Action- Confirmed Rally:

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Day 9: Investors Digest A Slew of Economic & Earnings News

Thursday, February 18, 2010
Market Commentary:

Investors digested a slew of economic and earnings news on the 9th day of the current rally attempt. The earnings and economic news of the day sent mixed economic signals. Retail giant Wal-Mart (WMT) gapped down and sliced below its 50 DMA line after reporting tepid Q4 results. Earnings rose +9% while sales rose +1% vs. the same period in the prior year. While this was a strong improvement from the first three quarters of 2009, analysts were expecting better results. Barring some unforeseen event, the average company in the benchmark S&P 500 grew its earnings close to +70% last quarter which snapped a record nine quarter losing streak.
Fed Unexpectedly Raises Rates From +0.50% to +0.75%:

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