Monday, April 25, 2011
Stock Market Commentary:
Stocks closed mixed to lower after the long holiday weekend as oil prices surged after civil unrest spread in Syria and other parts of the Middle East. Several other overseas markets were closed on Monday in observance of Easter. The market is back in a confirmed uptrend and remains healthy as long as all the major averages continue trading above their respective 50 DMA lines. The recent healthy action was in response to a series of stronger than expected Q1 results and a host of solid economic data. Now that the market is back in a confirmed rally, odds favor higher, not lower prices lie ahead.
Q1 Earnings, Higher Oil Prices, New Home Sales, & Fresh Breakouts
Over the long holiday weekend, civil unrest spread in Syria and other parts of the Middle East which sent oil prices surging. It is important to keep in mind that the higher oil prices act as an indirect tax on both businesses and consumers which,through time, adversely affects economic growth. In other news, so far 75% of companies in the S&P 500 that reported Q1 results have topped estimates which obviously bodes well for the current bull market. Strong earnings are an essential factor that drives every bull market. Therefore, as long as this continues, expect higher, not lower prices to follow. Nearly 200 companies are slated to release their Q1 results this week which will likely dictate the near term action for the major averages.
Elsewhere, new home sales rose 11% but the housing market continues to bounce along as a large bottom is being built. The report showed that the median price increased by 2.9% to $213,800 but was still down -4.9% vs. the same period last year. The average home price slid -3.8% but prices slid -6.1% on a year on year basis. Supply remains elevated at a 7.3 month total, lower than the 8.2 month total in February.
Market Action- Market In A Confirmed Rally
From our point of view, the market is back in “rally-mode” as all the major averages continue to trade above their respective 50 DMA lines and are flirting with, or at, fresh 2011 highs! In addition, leading stocks have held up very well even as the major averages slid below their respective 50 DMA lines in mid-April. If you are looking for specific help navigating this market, please contact us for more information.