Stocks End Holiday Week Higher

Friday, September 10, 2010
Stock Market Commentary:

Stocks ended higher on this shortened holiday week as investors digested a slew of stronger than expected economic data. Friday’s volume totals were reported mixed; lower on the NYSE and higher on the Nasdaq exchange. Advancers led decliners by almost a 2-to-1 ratio on the NYSE and by a 7-to-6 ratio on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE and trialed by a small margin on the Nasdaq exchange. There were 30 high-ranked companies from the Leaders List made a new 52-week high and appeared on the BreakOuts Page, lower than the 55 issues that appeared on the prior session.

Stocks Open Lower After Long Weekend:

Stocks were closed on Monday in observance of the Labor Day holiday. On Tuesday, stocks slid amid fresh concerns that the EU debt crisis may derail the global economic recovery. However, the bulls returned from a one day hiatus and sent stocks unanimously higher on Wednesday as the dollar fell and EU debt woes eased. Demand for Portugal’s debt was strong enough to allay concerns of another imminent EU debt crisis. Elsewhere, a handful of high-ranked stocks raced higher, which bodes well for this 10-day rally. Stocks lost a little ground after the Federal Reserve released its Beige Book which showed the economy was easing across much of the country.

Thursday & Friday’s Action: Stocks Edge

Stocks opened higher on Thursday and gave back a fair part of earlier gains but ended higher after encountering resistance near their respective 200 DMA lines. Before Thursday’s open, the Labor Department said weekly jobless claims fell -27,000 to 451,000 last week which bodes well for the ailing jobs market. Elsewhere, the trade deficit narrowed more than forecast which bodes well for the global recovery. It is also encouraging to see very little distribution emerge since the major averages confirmed their latest rally attempt on the Wednesday, September 1, 2010 follow-through day (FTD). Stocks ended higher on Friday as investors bet that the economy will grow,  albeit at a slower than expected rate.

Market Action- Confirmed Rally:

Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. It was encouraging to see a flurry of high-ranked leaders trigger fresh technical buy signals and break out of sound bases in recent sessions. The next important level to watch for the major averages are their respective 200-day moving average (DMA) lines.  It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

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