Tuesday, February 15, 2011
Stock Market Commentary:
Stocks slid on Tuesday after retail sales and U.S. homebuilder confidence missed estimates. On average, market internals remain healthy as the major averages flirt with fresh recovery highs. The fact that the major averages bounced back sharply after a very brief pullback in January illustrates how strong this 25-week rally actually is.
Retail Sales & Builder Confidence Miss Estimates:
The Commerce Department said retail sales rose +0.3% last month which was the smallest gain since June 2010 as snow blanketed much of the country. Other reports showed manufacturing in the New York area rose and confidence among home builders stagnated. The National Association of Home Builders/Wells Fargo sentiment index of U.S. home builders came in at 16 for the fourth consecutive month which matched estimates. Readings below 50 suggest more respondents said conditions were poor.
Market Action- Confirmed Rally; Week 25 Begins
It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.