7-Week Rally Ends; Market In A Correction

Friday, August 27, 2010
Stock Market Commentary:

The seven week rally that began on the July 7, 2010 follow-through day (FTD) ended on Tuesday after the latest round of dismal economic data dragged stocks lower. For the week, stocks ended lower but near their highs after a strong advance on Friday. Friday’s volume totals ended higher on the NYSE and the Nasdaq exchange compared to Thursday’s levels which suggested that large institutions were aggressively buying stocks. Advancers trumped decliners by over a 4-to-1 ratio on the NYSE and on the Nasdaq exchange. New 52-week highs outnumbered new 52-week lows on the NYSE but trailed new lows on the Nasdaq exchange. There were 21 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, higher than the 10 issues that appeared on the prior session.

Monday & Tuesday’s Action; Stocks Fall on Dismal Economic Data:

The major averages negatively reversed (opened higher but closed lower) on Monday after encountering resistance near their respective 50-day moving average (DMA) lines. Stocks slid on Tuesday after existing home sales tanked, the 10-year Treasury yield plunged to the lowest level in 17 months, and the yen rose to the highest level versus the dollar since 1995. Overnight, stocks in Asia and Europe fell after the yen jumped to a 15-year high against the dollar and Treasury rates slid to their lowest level since the March 2009 bottom. This put pressure on US futures and set the stage for a weak open. The “big” headline of the day occurred when the National Association of Realtors said existing home sales slid by -27.2% to a 3.83 million annual rate in April. The outsized decline was attributed to a high unemployment rate and slowing economic data. This was also the lowest reading in a decade and lower than the worst estimate on Wall Street.

Wednesday-Friday’s Action; Day Count Reset:

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Week in Review: Stocks End Flat After Hitting Resistance

Friday, July 30, 2010
Stock Market Commentary:

For the week, the major averages ended mixed to slightly lower as investors digested a slew of economic and earnings data. On Friday, volume, an important indicator of institutional sponsorship, was lower than Thursday’s session on both major exchanges. Advancers led decliners by a 22-to-15 ratio on the NYSE and by a 5-to-4 ratio on the Nasdaq exchange.  New 52-week highs outnumbered new 52-week lows on the NYSE and the Nasdaq exchange.  There were 19 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 21 issues that appeared on the prior session.

Monday-Wednesday’s Action: Stocks Stall Near Prior Chart Highs:

Stocks opened higher on Monday after FedEx Corp (FDX) reported solid results and raised its 2010 outlook. Before Monday’s open, FedEx raised their 2010 outlook and said earnings soared +108% while sales grew by +20% last quarter. The second largest package-delivery company’s shares gapped up on monstrous trade as investors welcomed the positive news. Normally, transportation stocks are a good proxy for general economic activity. Elsewhere, the Commerce Department said new home sales topped estimates and rose in June, following an unprecedented decline in the previous month. New home sales rose by +24% from May to an annual pace of 330,000. Stocks ended mixed to slightly lower on Tuesday after the S&P Case-Shiller home-price index showed home prices across the US rose in May due to “seasonal factors and the residual impact of the now-expired first-time home buyers’ tax credit.”
The major averages ended lower on Wednesday after encountering resistance near their recent chart highs. The Commerce Department said durable goods unexpectedly fell last month. At 2:00PM EST, the Fed published its Beige Book which summarizes economic conditions at 12 districts around the country. The report showed that the economic recovery slowed in some districts while other districts held steady.

Thursday & Friday’s Action- Stocks Fall on Lackluster Economic Data:

The major averages negatively reversed on Thursday after encountering resistance near their prior chart highs and their 50% retracment from their April 2010’s high. Technology and financial shares fell after the latest of earnings reports were released and New York Attorney General Andrew Cuomo began a fraud probe into the life insurance industry and subpoenaed several well-known firms.
Elsewhere, the Labor Department said jobless claims fell last week and confidence improved about Europe’s economy. Stocks turned tail after James Bullard, President of the Federal Reserve Bank of St. Louis, said the central bank should resume purchases of Treasury securities if the economy slows and deflation sets in. On Friday, stocks ended mixed to slightly higher after GDP slowed in the second quarter and the latest read on consumer confidence topped estimates.

Market Action- Confirmed Rally:

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