19 Jul
Daily Market Commentary

Stocks End Higher; Volume Light

Monday, July 19, 2010
Stock Market Commentary

The major averages ended higher on Monday after getting smacked on Friday. As expected, volume was reported lower than Friday’s session on both exchanges due to options expirations. There were only 7 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 4 issues that appeared on the prior session. Advancers led decliners by a 12-to-7 ratio on the NYSE and by a 8-to-5 ratio on the Nasdaq exchange. New 52-week highs solidly outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange.  For the rally to have ongoing success it will be critical for a healthy crop of leaders to continue showing up hitting new 52-week highs.

Housing Confidence Plunges:

The National Association of Home Builders/Wells Fargo confidence index slid to 14 in July which is the the lowest reading since April 2009 and down from last month’s reading of 16. Any reading below 50 means that respondents consider the current environment as poor. Later this week housing starts and existing home sales are slated to be released which will give the latest read on the ailing housing market. The major averages continue to face stubborn resistance near last week’s highs and their respective multi month downward trendline and moving averages. Over the next few weeks, it will be very interesting to see how companies fared last quarter and, equally important, to see how the market reacts to the numbers. Analysts believe that Q2 earnings for S&P 500 companies rose +34%.

Market Action- Rally Under Pressure:

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16 Jul
Daily Market Commentary

Stocks Encounter Stubborn Resistance

Friday, July 16, 2010
Stock Market Commentary:

Friday’s plunge negated the week’s gains as investors digested a slew of economic and earnings data. As expected, volume was reported higher than Thursday’s session on both exchanges due to options expirations. There were only 4 high-ranked companies from theCANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 16 issues that appeared on the prior session. Decliners trumped advancers by nearly a 4-to-1 ratio on the NYSE and over a 7-to-1 ratio on the Nasdaq exchange. New 52-week highs solidly outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange.  For the rally to have ongoing success it will be critical for a healthy crop of leaders to continue showing up hitting new 52-week highs.

Monday- Wednesday’s Action: Earnings Season Begins; Stocks Edge Higher:

The major averages ended slightly higher on Monday after spending most of the day trading between positive and negative territory ahead of Alcoa Inc’s. (AA -3.97%) Q2 results. After Monday’s closing bell, the largest US aluminum company kicked off earnings season and reported a profitable Q2 and said sales rose +22%. Stocks enjoyed hefty gains on Tuesday after the government said the trade deficit topped $1 trillion. Technically, it was encouraging to see the Dow Jones Industrial Average rally above its 50-day moving average (DMA) line and rise above a downward trendline. Tuesday’s gain also helped the S&P 600 Small Cap Index rally above the April – June downward trendline shown above.  The benchmark S&P 500 Index is now challenging its 50 DMA line, yet it faces resistance at its short-term average and it also remains trading under its 200 DMA line. The Nasdaq Composite Index has rallied very near its 50 and 200 DMA lines which have now converged.  The NYSE Composite Index, which was noted in this commentary recently as the first major index to violate its 50 DMA line and the see its 50 and 200 DMA lines form a “death cross”, rallied for its first close above its 50 DMA since May 3rd. However, it was disconcerting to see the week’s gains erased by Friday.
On Wednesday, the major averages ended mixed to slightly higher as they consolidated Tuesday’s large move.The benchmark S&P 500 Index snapped a streak of 6 straight gains after retail sales fell last month and the Fed released the minutes of its latest meeting. The Commerce Department said retail sales fell -0.5% last month which topped the Street’s estimate and followed a -1.1% decline in May. Most of the decline came from the ailing automobile sector, excluding auto dealers, demand fell -0.1% which matched the median estimate. Elsewhere, the Federal Reserve released the minutes of its latest meeting which showed a less than stellar economic outlook. Fed officials said the economy has “softened” which sparked concern of a double dip recession.

Thursday & Friday’s Action- Stocks Fall After Encountering Stubborn Resistance:

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15 Jul
Daily Market Commentary

Dow & Nasdaq Snap A 7-Day Winning Streak; Nasdaq & SP500 Close Below Resistance

Thursday, July 15, 2010
Stock Market Commentary:

US stocks shrugged off earlier weakness and closed near their intraday highs as investors digested a flurry of headlines. Volume was reported mixed compared to Wednesday’s session; higher on the NYSE and lower on the Nasdaq exchange. There were 16 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 28 issues that appeared on the prior session. Decliners trailed advancers by approximately an 18-to-19 ratio on the NYSE but led by a 2-to-1 ratio on the Nasdaq exchange. New 52-week highs solidly outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange.

Investors Digest A Slew of Economic, Earnings & Political Data:

Investor’s digested a slew of data on Thursday: JP Morgan (JPM +0.27%) and Google (GOOG +0.55%) reported their latest quarterly result, weekly jobless claims and producer prices fell, Goldman Sachs (GS +4.43%) settled with the SEC for $550 million, BP (BP +7.57%) plugged the broken well, the Senate sent President Obama the largest financial regulatory bill since the Great Depression, and the latest read on the manufacturing industry was dismal. However, it was somewhat encouraging to see the market shrug off earlier weakness and close near its intraday highs even though the Nasdaq composite and the Dow Jones Industrial Average snapped a 7-day winning streak. It is important to note that both the US dollar and the major averages ended lower on Thursday (in the recent past they tend to move in opposite directions).

Market Action- Confirmed Rally:

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14 Jul
Daily Market Commentary

Soft Retail Sales & Blasé Fed Minutes Weigh On Stocks

Tuesday, July 14, 2010
Stock Market Commentary:

The benchmark S&P 500 index snapped a six day rally after retail sales fell last month and the Fed released the minutes of its latest meeting. Volume, a critical component of institutional sponsorship, was lower on the Nasdaq and the NYSE. There were 28 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 23 issues that appeared on the prior session. Decliners led advancers by a 20-to-17 ratio on the NYSE and a 3-to-2 ratio on the Nasdaq exchange. Finally, new 52-week highs outnumbered new 52-week lows on the NYSE and the Nasdaq exchange.

Retail Sales & Fed Minutes Disappoint:

The Commerce Department said retail sales fell -0.5% last month which topped the Street’s estimate and followed a -1.1% decline in May. Most of the decline came from the ailing automobile sector, excluding auto dealers, demand fell -0.1% which matched the median estimate. Elsewhere, the Federal Reserve released the minutes of its latest meeting which showed a less than stellar economic outlook. Fed officials said their economic outlook has “softened” which sparked concern of a double dip recession.

Market Action- Confirmed Rally:

Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. Remember to remain very selective because most of the major averages are still trading below their downward sloping 50 and 200 DMA lines. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

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13 Jul
Daily Market Commentary

Stocks Rally For 6th Consecutive Day

Tuesday, July 13, 2010
Stock Market Commentary:

The major averages rallied for a sixth consecutive day after Alcoa (AA) and CSX (CSX) officially kicked off earnings season and the government said the trade deficit topped $1 trillion. Volume, a critical component of institutional sponsorship, was higher on the Nasdaq and the NYSE. There were 23 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 21 issues that appeared on the prior session. Advancers trumped decliners by over a 5-to-1 ratio on the NYSE and nearly a 5-to-1 ratio on the Nasdaq exchange. Finally, new 52-week highs outnumbered new 52-week lows on the NYSE and the Nasdaq exchange. It remains critically important for leadership (new highs) to expand if the new rally effort will prove to be a sustained market advance. If not, last Wednesday’s strong move may turn out to be the latest in a string of failed rallies confirmed with follow-through days.

Earnings & Economic Data Help Lift Stocks:

It was healthy to see the major averages rally after second quarter earnings season officially began. Only time will tell whether or not this rally will continue as a slew of companies report their results over the next few weeks. Both Alcoa and CSX reported solid results and raised their 2010 forecasts which helped allay concern that the economic recovery was in jeopardy, or that a double-dip recession may occur. Elsewhere, the Treasury Department said the federal deficit topped $1 trillion during the first nine months of this budget year. This was -7.6% lower than last year’s total of $1.09 trillion.

Dow Jones Industrial Average Jumps Above Resistance:

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12 Jul
Daily Market Commentary

Stocks Edge Higher Ahead of Q2 Earnings Season

Monday, July 12, 2010
Stock Market Commentary:

The major averages closed higher after spending most of the day trading between positive and negative territory. Volume, a critical component of institutional sponsorship, was mixed: higher on the Nasdaq and lower on the NYSE. There were 21 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 16 issues that appeared on the prior session. Decliners led advancers by nearly a 2-to-1 rato on the NYSE and over a 2-to-1 ratio on the Nasdaq exchange. New 52-week highs outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange. It remains critically important for leadership (new highs) to expand if the new rally effort will prove to be a sustained market advance. If not, Wednesday’s strong move may turn out to be the latest in a string of failed rallies confirmed with follow-through days.

 Q2 Earnings Season Officially Begins:

Earnings season officially began after Monday’s closing bell when Alcoa Inc. (AA), the first dow component, released their Q2 results. The largest US aluminum company was profitable in Q2 and said sales rose +22%. Over the next few weeks, it will be very interesting to see how company’s fared last quarter and, equally important, to see how the market reacts to the numbers. Analysts believe that Q2 earnings for S&P 500 companies rose +34%. This week alone, there will be approximately 23 companies in the S&P 500 that are slated to release their results.

Market Action- Confirmed Rally:

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09 Jul
Daily Market Commentary

Stocks Enjoy Best Week of 2010!

Friday, July 9, 2010
Stock Market Commentary:

It was an impressive week on Wall Street: stocks confirmed their latest rally attempt on Wednesday, enjoyed their best weekly gain of the year, snapped a two week losing streak, and bounced from fresh 2010 lows. On Friday, volume, a critical component of institutional sponsorship, fell short of Thursday’s levels on the NYSE and Nasdaq exchange. There were 16 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 9 issues that appeared on the prior session. Advancers trumped decliners by more than 3-to-1 on the NYSE and by more than 2-to-1 on the Nasdaq exchange. New 52-week highs outnumbered new 52-week lows on the NYSE but trailed on the Nasdaq exchange. It remains critically important for leadership (new highs) to expand if the new rally effort will prove to be a sustained market advance. If not, Wednesday’s strong move may turn out to be the latest in a string of failed rallies confirmed with follow-through days.

Monday- Wednesday Action- Stocks Confirm Latest Rally Attempt:

The stock market was closed on Monday in observance of July 4th. Stocks edged higher on Tuesday after strong gains from Asia and Europe sparked optimism that an oversold technical bounce may occur. Economic news was less than stellar, the ISM service index grew at a slower than expected rate in June which led many to question the health of the ongoing global economic recovery. On Wednesday, stocks scored a follow-through day (FTD) on the fourth day of their latest rally attempt. Further clarifying the day count as we see it, last Thursday, July 1, all of the major averages marked Day 1 of a new rally attempt. Although they closed that session with losses, strong finishes in the upper part of their intra-day ranges suggested that support was being found which, arguably, satisfied the essence of a new rally attempt. Since then, the Dow Jones Industrial Average and small-cap Russell 2000 index both undercut Thursday’s lows which reset the day count for each, however, they both rallied on Tuesday which marked Day 1 for those two indexes. Meanwhile, the tech-heavy Nasdaq Composite and the benchmark S&P 500 Index avoided undercutting Thursday’s lows, so Wednesday’s session marked Day 4 and opened the window for a new FTD to emerge. Remember that there are three important characteristics that must occur in order for a sound FTD to emerge: One or more of the major averages must rally at least +1.7% (anytime after Day 3 of a new rally attempt), volume on the exchange(s) must be higher than the prior session, and a new batch of high-ranked leaders must hit new 52-week highs and trigger fresh technical buy signals.  

Thursday & Friday’s Action- Stocks Edge Higher Ahead Of Earnings

On Thursday, stocks rallied after two positive economic data points eased concern that the economic recovery is getting worse: jobless claims fell and same store sales rose at several key retailers. The Labor Department said initial jobless claims fell by -21,000 to 454,000 last week. This was lower than the Street’s forecast for a decline to 460,000 from an initially reported 472,000 during the prior week. The report showed that the number of people receiving unemployment insurance plunged to the lowest point since 2008, while those getting emergency benefits also fell after Congress failed to pass legislation extending the assistance. Elsewhere, a flurry of high profile retailers also reported stronger than expected same store sales for June. Stocks edged higher on Friday as investors await earnings season which is slated to begin next week.

Market Action- Confirmed Rally:

Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. Looking forward, the 200 DMA line should now act as near term support as this market continues advancing, while any reversal would be a worrisome sign. It is important to note that the NYSE composite, benchmark S&P 500 index, and the Dow Jones Industrial Average have now all seen their 50 DMA lines undercut their respective 200 DMA lines which is is known as a “death cross” and has bearish ramifications. In addition, remember to remain very selective because all of the major averages are still trading below their downward sloping 50 and 200 DMA lines and a fresh downward trendline (shown above).  It was somewhat disconcerting to see volume remain light (below average) behind the confirming gains. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

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08 Jul
Daily Market Commentary

Stocks Rally On Healthy Economic Data

Thursday, July 8, 2010
Stock Market Commentary:

The major averages rallied one day after posting a new follow-through day (FTD). Volume, a critical component of institutional sponsorship, fell short of Wednesday’s levels while advancers trumped decliners on the NYSE and Nasdaq exchange. However, 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 7 issues that appeared on the prior session. Meanwhile, new 52-week lows outnumbered new 52-week highs on the Nasdaq but trailed on the NYSE. It will be critically important for leadership to expand if the new rally effort will prove to be a sustained market advance. If not, Wednesday’s strong move may turn out to be the latest in a string of failed rallies confirmed with follow-through days.

Healthy Economic Data Lifts Stocks:

There were two positive economic data points which helped send stocks higher on Thursday: jobless claims fell and same store sales rose at several key retailers. The Labor Department said initial jobless claims fell by -21,000 to 454,000 last week. This was lower than the Street’s forecast for a decline to 460,000 from an initially reported 472,000 during the prior week. The report showed that the number of people receiving unemployment insurance plunged to the lowest point since 2008, while those getting emergency benefits also fell after Congress failed to pass legislation extending the assistance. Elsewhere, a flurry of high profile retailers also reported stronger than expected same store sales for June. This helped allay concern that the US consumer was spending less due to the economic uncertainty.

Market Action- Confirmed Rally:

Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. Looking forward, the 200 DMA line should now act as near term support as this market continues advancing, while any reversal would be a worrisome sign. It is important to note that the NYSE composite, benchmark S&P 500 index, and the Dow Jones Industrial Average have now all seen their 50 DMA lines undercut their respective 200 DMA lines which is is known as a “death cross” and has bearish ramifications. In addition, remember to remain very selective because all of the major averages are still trading below their downward sloping 50 and 200 DMA lines.  It was somewhat disconcerting to see volume remain light (below average) behind the confirming gains. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

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07 Jul
Daily Market Commentary

Stocks Follow-Through & Confirm A New Rally!

Wednesday, July 7, 2010
Market Commentary:

Stocks scored a follow-through day (FTD) on the fourth day of their latest rally attempt as volume, a critical component of institutional sponsorship, topped Tuesday’s levels. Advancers trumped decliners by over a 5-to-1 ratio on the NYSE and over a 3-to-1 ratio on the Nasdaq exchange. However, there were only 7 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 8 issues that appeared on the prior session. Meanwhile, new 52-week lows outnumbered new 52-week highs on the Nasdaq and trailed on the NYSE. It will be important for leadership to expand if the new rally effort will prove to be a sustained market advance. If not, Wednesday’s strong move may be the latest in a string of failed follow-through days.

Day Count- A Closer Look:

To further clarify the day count, last Thursday, July 1, all the major averages marked day 1 of a new rally attempt. Since then, the Dow Jones Industrial Average and small-cap Russell 2000 index both undercut Thursday’s lows which reset their day count. However, they both rallied on Tuesday which marked Day 1 for those two indexes. Meanwhile, the tech-heavy Nasdaq composite and the benchmark S&P 500 index have yet to undercut Thursday’s lows which means that Wednesday marked day 4 and opened the window for a new FTD to emerge. Remember, that there are three important characteristics that must occur in order for a sound FTD to emerge: One of the major averages must rally at least +1.7% (anytime after day 3 of a new rally attempt), volume must be higher than the prior session, and a new batch of high ranked leaders must trigger fresh technical buy signals. Technically, it was also encouraging to see the benchmark S&P 500 index close above 1040 which has served as formidable support for most of the year.

Dollar Falls; Stocks & Commodities Rally:

Elsewhere, the US dollar continued its three week slide which sent a slew of dollar denominated assets higher (mainly stocks and commodities). In addition,  growth in US retail sales sparked optimism that earnings season will top weak estimates. Investors also believe that most European banks will pass their stress tests which has weighed on the market’s psyche in recent months. The International Council of Shopping Centers released a report which showed that sales were growing at the fastest pace since 2006 which helped allay concerns that the slump in consumer confidence will threaten the economic recovery.

Market Action- Confirmed Rally:

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06 Jul
Daily Market Commentary

Stocks End Near Lows; After Strong Open

Friday, July 6, 2010
Stock Market Commentary:

For the most part, the major averages marked Day 1 of a new rally attempt but ended well off their earlier highs, after a disappointing report from the service sector dragged stocks lower. As expected, Monday’s volume totals were reported higher on the NYSE and the Nasdaq exchange compared to Friday’s pre-holiday levels. Advancers led decliners by a 10-to-9 ratio on the NYSE but trailed by a 1-to-2 ratio on the Nasdaq exchange. There were only 8 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 5 issues that appeared on the prior session. Meanwhile, new 52-week lows outnumbered new 52-week highs on the NYSE and the Nasdaq exchange. As leadership evaporated in recent sessions, in this commentary it was repeatedly noted – “Without a healthy crop of leaders hitting new highs it is hard for the major averages to sustain a rally.”

Strong Start; Weak Finish:

US stocks opened higher after strong gains from Asia and Europe sparked optimism that an oversold technical bounce may occur. Interestingly, the benchmark S&P 500 index rallied righ up the 1040 area before encountering resistance and closing near its lows for the day. It is important to note that for most of 2010, the 1040 area has been important support and has now become resistance. That said, the bears remain in control until that the S&P 500 closes above that important level.  Economic news was less than stellar, the ISM service index grew at a slower than expected rate in June which leds many to question the health of the ongoing global economic recovery.

Market Action- In A Correction:

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