Stocks End Week Mixed; Nasdaq Closes Below 50 DMA line- 1st Weekly Close Below It This Yr!

Nasdaq Closes Below 50 DMA line For 1st Time This YR

Nasdaq Closes Below 50 DMA line For 1st Time This YR

Friday, April 20, 2012
Stock Market Commentary:

Stocks ended the week mixed this week as investors digested a slew of earnings and economic data. As earnings and economic data continues to be released in droves, it is paramount that we not only pay attention to the actual numbers but how the stocks (and major averages) react to the numbers.  This allows us to see how the market participants are “voting” and helps us filter out the noise and focus on what matters most: price action. We find it disconcerting to see the benchmark S&P 500, Russell 2000, and Nasdaq composite close below their 50 DMA lines while the Dow Jones Industrial Average literally closed on it.

Monday-Wednesday: Leaders Smacked India & Brazil’s Central Banks Cut Rates

The major averages ended mixed on Monday as investors digested the latest round of tepid economic data. However, the real news was the fact that a slew of leaders were smacked in heavy volume! Apple (AAPL), (PCLN), and (GOOG) were among of the few of the leaders that were smacked in heavy trade. Economic data also failed to impress. Homebuilder sentiment plunged in March which put pressure on a slew of housing stocks and the ailing housing market. New York Manufacturing activity collapsed to 6.56 in April from 20.21 in March. This also missed the Street’s estimate of 18. On a bright note, retail sales rose +0.8% which topped the average estimate for a gain of +0.3%. Stocks opened higher on Tuesday as investors digested the latest round of earnings and economic data. The Commerce Department said housing starts fell an expected -5.8% to a seasonally adjusted annual rate of 654,000 units in March which missed the Street’s estimate for 705,000. Meanwhile, industrial production was unchanged for a second straight month in March which missed a gain of +0.3%. India’s central bank cut rates to help stimulate their economy.
Stocks fell on Wednesday as fresh concerns spread about Spain’s onerous debt levels. In other European news, minutes from the Bank of England showed that only one Monetary Policy Committee member still supported quantitative easing which squashed hopes of anther round of QE. ECB policymaker Jens Weidmann told Reuters that Spain should take care of its own debt woes and ruled out a third long-term financing operation (LTRO) from the ECB. In a surprise OP-ED, Portugal’s prime minister wrote in the Financial Times that the country may not return to capital markets for funds in 2013, as previously expected. Earnings disappointments from IBM and Intel (INTC) also weighed on stocks.

Thursday & Friday’s Action: EU Woes Ease, Stocks Rally

Stocks fell on Thursday as investors digested a slew of economic and earnings data. Demand for Spain’s much anticipated auction was solid but yields were mixed. Spain sold 2.5 billion euro ($3.3 billion) of 2-and 10-year sovereign bonds but yields rose on the 10-year debt to 5.743%, and fell on the 2-year debt to 3.463%. In other news, Brazil’s central bank cut interest rates by 75 basis points to 9% and left the door open for more rate cuts in an attempt to stimulate their economy. A slew of high profile companies released Q1 earnings and most topped estimates. However, news from the economic front was not impressive. Weekly jobless claims rose for the second straight week and missed the Street’s estimate. Existing home sales fell -2.6% for March and missed the Street’s estimate. The Philly Fed Index came in at 8.5 in April which was lower than March’s 12.5 reading and the 10.3 estimate. Meanwhile, the Conference Board’s Index of Leading Indicators rose +0.3% which topped the average estimate for a gain of +0.2%. Stocks rallied on Friday as investors digested the latest round of earnings data, the immediate threat of a Spanish debt woes eased, and sentiment rose in Germany.

Market Outlook- In A Correction

From our point of view, the market is still digesting its strong move in Q1 of 2011. The major averages are currently struggling with their respective 50 DMA lines as investors digest a slew of earnings and economic data. As always, keep your losses small and never argue with the tape. 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!

Please Note:
After Nearly 10 Years of writing our daily stock market commentary, due to time constraints, this will become a weekly note.
Starting May 1, 2012.  

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Stocks End Week Mixed

R2k Inverse H&S Pattern

R2k Inverse H&S Pattern

Friday, March 23, 2012
Stock Market Commentary:

Stocks and other risk assets ended the week mixed as weaker than expected economic data from China and Europe renewed fears of a global slowdown. As we have been mentioning for weeks, the market is extended to the upside and we would not be surprised to see a nice pullback to shake out the weak/late hands. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. Since then, stocks have been enjoying a very strong uptrend. The benchmark S&P 500 paused near its 2011 high (~1370) before moving higher and that level should now become support. The next level of support would be the 50 DMA line, then a deeper 5-9% pullback. That would bring the S&P 500 down to 1350-1280. It is important to note that the bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line.

Monday-Wednesday’s Action: Pullback Begins

In the U.S., stocks were relatively quiet on Monday as investors digested the prior week’s strong move and the latest round of housing data was released. The National Association of Home Builders/Wells Fargo Housing Market Index held steady at 28 in March. The index is still below the boom/bust level of 50 which separates positive and negative sentiment but is now holding steady at its highest level since June 2007. In other news, AAPL said it will offer a $2.65 dividend and offer a share buy back to help utilize its massive pile of cash. Before Tuesday’s open, futures were down sharply due to renewed fear that China’s red-hot economy may begin to slow. Economic data was light in the U.S. but the news that did come out was mixed. The Commerce Department said housing starts fell -1.1% in February to a seasonally adjusted annual rate of 698,000 units, but building permits vaulted to their highest level in more than 3 years! The Street was looking for housing starts to be at a 700,000-unit annual rate.
Stocks slid on Wednesday after Ben Bernanke said that he would take additional steps to stimulate the economy if conditions worsened. The Mortgage Bankers Association said weekly mortgage applications fell in the middle of March due to a drop in refinancing demand. The National Association of Realtors said home sales slid -0.9% in February to a seasonally adjusted annual rate of 4.59 million and revised January’s reading to 4.63 million. That was the highest level since May 2010.  Equally important, housing stocks continue to act well and for the most part remain above their respective 50 DMA lines.

Thursday & Friday’s Action: China And Europe Slow, U.S. Economy Remains Fines:

Before Thursday’s open, stocks in Europe fell after two weaker-than-expected economic data points from China and Europe were released. China’s PMI, which measures its manufacturing sector, slid for the 5th consecutive month which led many to question the health of the global recovery. A few hours later, the euro-zone said its PMI index unexpectedly fell due to weakness in France and Germany, which are Europe’s two strongest economies. Separately, there was a 24-hour strike in Portugal to protest their austerity measures and Italy’s largest trade union also called for a strike which would weaken two already fragile economies.
All this overshadowed decent strength from the U.S. economy. The Labor Department said weekly jobless claims fell -5,000 to 348,000which was a fresh four year low. The Conference Board said its index of leading economic indicators rose +0.7% in February which topped the Street’s estimate for a gain of +0.4%. Finally, home prices remained relatively flat in January across much of the U.S. according to the Federal Housing Finance Agency. However, compared January 2011, prices fell by -0.8%. Stocks were relatively quiet on Friday as investors digested a busy week of economic data. The Commerce Department said new home sales unexpectedly fell by -1.6% to a seasonally adjusted 313,000-unit annual rate in February. The report showed that the median home price swelled by +8.3% to $233,700, the highest level since June.

Market Outlook- Confirmed Rally

Risk assets have begun pulling back which at this point is considered normal. The key going forward is to gauge the health of the pullback and see if the bulls are able to defend logical areas of support (recent chart lows and important moving averages). So far this action is considered healthy for the risk on trade. However, if sellers show up and support is breached then the bears will have regained control of this market. As always, keep your losses small and never argue with the tape. 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!