Weekly Jobless Claims Fall

Thursday, October 28, 2010
Stock Market Commentary:

Stocks and commodities opened higher as the USD snapped a two day winning streak but the bears quickly showed up and sent stocks lower as traders await Friday’s GDP report. Volume patterns remain healthy as the major averages are now in the 9th week of their ongoing rally. However, it is important to note that there have been an ominous number of distribution days that have emerged in the popular indexes in recent sessions which suggests caution. On average, market internals remain healthy evidenced by an upward sloping Advance/Decline line and the fact that new 52-week highs continue to easily outnumber new 52-week lows on both exchanges.

Jobless Claims Fall; Earnings Remain Strong:

Before Thursday’s open, futures jumped after jobless claims fell to a three month low. The Labor Department said initial jobless claims fell by -21,000 to 434,000 in the week ended Oct. 23. This was the lowest reading since July when fewer auto plants than normal closed for retooling. The report also showed that the total number of people receiving unemployment insurance fell to a two-year low, while those getting extended payments also contracted. The next week will be very busy on Wall Street. Tomorrow, the government will report the first reading on Q3 GDP. The mid-term elections are on Tuesday, the Fed will meet on Wednesday and announce the details of QE 2, and October’s non-farm payrolls report will be released next Friday. Needless, to see it will be a very busy week and we, as always, will be focusing on how the market reacts to the news, more than the news itself.
Market Action- Confirmed Rally, Week 9:

Heretofore, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong but the market action has been wide-and-loose which is not a healthy sign. The S&P 500 sliced below its two month upward trendline (shown above) which is not ideal. The next level of support for the major averages is their September highs, then their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. We have enjoyed large gains since the September 1st FTD and for the first time, the tape is getting sloppy.  Trade accordingly.

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Thursday, October 7, 2010
Stock Market Commentary:

Stocks spent most of the session in the red after the latest read on the jobs market fell short of estimates and the US dollar edged higher. Volume totals were reported lighter on the NYSE and on the Nasdaq exchange compared to Wednesday’s session which signaled that large institutions were not aggressively buying or selling stocks. Decliners led advancers by a modest ratio on the NYSE and on the Nasdaq exchange, while new 52-week highs easily outnumbered new 52-week lows on both exchanges. There were 47 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower from the 58 issues that appeared on the prior session.

Central Bank Action & Latest Economic Data:

Overnight, the European Central Bank and the Bank of England kept interest rates steady, near record lows for the 17th consecutive month which matched expectations. Before Thursday’s opening bell, the Labor Department said weekly jobless claims slid by -11,000 to 445,000. Elsewhere, same store chain sales rose which helped allay slowing economic woes. Investors are now waiting for Friday’s non farm payrolls report for a better read on the fragile jobs market.

Market Action: Confirmed Rally

So far, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been very strong and stocks are simply pausing to consolidate their recent gains. It was encouraging to see the bulls show up and defend support (formerly resistance) in recent weeks. The next level of support for the major averages is their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. Trade accordingly.