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:
The major averages are still above their respective 2-month downward trendlines which is a healthy sign. However, the Nasdaq Composite, NYSE Composite, and the benchmark S&P 500 indexes collectively closed below their respective 200-day moving average (DMA) lines which is not ideal. In order for a new leg higher to begin, the major averages will have to close above their longer term averages and their recent chart highs which currently serve as the next levels of resistance to watch. The window remains open for for high-ranked stocks to be accumulated when they trigger fresh technical buy signals. Trade accordingly.