Friday, June 25, 2010
Stock Market Commentary:
The major averages negatively reversed (opened higher and closed lower) this week after encountering resistance near their respective 50 DMA lines. The current rally is under pressure after the major averages fell back below their respective 200 DMA lines and suffered a series of ominous distribution days. On Friday, volume totals were reported higher on the NYSE and the Nasdaq exchange compared to Thursday’s levels due to the rebalancing in the small cap Russell 2000 index. Advancers trumped decliners by more than a 2-to-1 on the NYSE and on the Nasdaq exchange. There were only 9 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, higher than the 2 issues that appeared on the prior session. Leadership has evaporated, and without a healthy crop of leaders hitting new highs it is hard for the major averages to sustain a rally. New 52-week highs outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange.
Monday & Tuesday’s Action- Stocks Encounter Resistance At 50 DMA line:
Stocks opened sharply higher on Monday but closed lower after The People’s Bank of China pledged on June 19 to make the yuan more flexible. The major averages negatively reversed after encountering resistance near their respective 50 DMA lines and spent the week pulling back. On Tuesday, both the Dow Jones Industrial Average and the benchmark S&P 500 Index close below their respective 200 DMA lines only one week after the latest follow-through day (FTD) confirmed a new rally. In our view, this put the latest rally under pressure and suggested lower prices may likely follow. The selling accelerated after the National Association of Realtors said sales of previously owned homes fell -2.2% last month and the euro fell for a second consecutive day.