Stocks Get Smacked As Dollar Soars!

Wednesday, August 11, 2010
Stock Market Commentary:

The major averages got smacked on Wednesday after a weaker than expected manufacturing report was released from China and the US trade gap widened. Volume totals were reported higher on the NYSE and on the Nasdaq exchanges versus the prior session, which marked a second consecutive distribution day for the major averages. Decliners trumped advancers by over a 5-to-1 ratio on the NYSE and by over an 8-to-1 ratio on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE but trailed new lows on the Nasdaq exchange. There were only high-ranked companies from the Leaders List made a new 52-week high and appeared on the BreakOuts Page, down sharply from the 24 issues that appeared on the prior session.

China’s Economy Slows; Dollar Soars!

Stocks fell in Asia and Europea after China released a weaker than expected manufacturing report. This led many to question whether or not China’s strong economy will be able to offset weakness in other areas of the global recovery. On Tuesday, China said imports fell short of the Street’s lofty expectations which also put pressure on the global recovery theme. In the US, the trade deficit unexpectedly grew in June to the highest level since October 2008. The report showed that consumer goods imports rose to a record level and exports fell. Fears of a global economic slowdown sent the US dollar soaring which also put pressure on a slew of dollar denominated assets (mainly stocks and commodities). 

Market Action- Uptrend Under Pressure

The technical action in the major averages has deteriorated significantly now that all the major averages failed to close above their recent chart highs (resistance) and sliced below their respective 200 DMA lines. It is also worrisome to see the number of distribution days pile up in recent weeks which puts pressure on the current five-week rally.  In order for a new leg higher to begin, all the major averages must close and remain above their respective resistance levels. Trade accordingly.
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