22 Dec
Daily Market Commentary

Stocks Rally On Lighter Volume

sp500 closed below resistance

sp500 closed below resistance


Tuesday, December 22, 2009
Market Commentary:
Stocks in the US closed higher after the latest round of economic data was released. Volume, an important indicator of institutional sponsorship, was lower than Monday’s levels. Advancers led decliners by nearly a 2-to-1 ratio on the NYSE and by a 16-to-11 ratio on the Nasdaq exchange. There were 52 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 from the total of 43 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.
Economic Data:
Before Tuesday’s opening bell, the Commerce Department said third quarter GDP rose by +2.2% which was lower than prior estimates and led many to question the health of the ongoing recovery. The report showed that companies curbed spending and cut inventories due to lackluster demand. At 10:00 AM EST, the National Association of Realtors said existing home sales jumped +7.4%  to a 6.54 million annual rate. The report was the highest in more than two years and led many to question whether or not the ailing housing market has finally bottomed.
USD vs. Dollar Denominated Assets
Continuing the recent trend, stocks and the USD both advanced today. However, other dollar denominated assets (i.e. many commodities) edged lower. Investors are still not sure if this is the beginning of a new trend: stocks are now decoupled from the USD or if this is a brief anomaly which will pass after the new year?
Price & Volume Action:
According to Bloomberg.com, the Street expects 2010 earnings to grow +24% which follows a -12% decline in 2009 for the average company in the S&P 500. The survey also showed that first quarter earnings are expected to grow +28% when compared to the same period in 2009. The Dow Jones Industrial Average and the benchmark S&P 500 index both closed below their respective resistance levels on this shortened holiday week. Elsewhere, the tech-heavy Nasdaq composite hit another fresh 2009 high as investors continue to flock to tech stocks for potential growth. However, we would be remiss not to note that volume has steadily declined as the market edges higher which is not a “good” sign.

21 Dec
Daily Market Commentary

Nasdaq Hits Fresh 2009 High As Dollar Rallies

Monday, December 21, 2009

Market Commentary:

The major averages rallied on Monday as the latest round of merges and acquisitions were announced. As expected, volume, an important indicator of institutional sponsorship, was lower than Friday’s quadruple witching inflated levels. Advancers led decliners by over a 2-to-1 ratio on the NYSE and by nearly a 2-to-1 ratio on the Nasdaq exchange. There were 43 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 from the total of 26 issues that appeared on the prior session. New 52-week highs still outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

U.S. Dollar & Stocks:

It was encouraging to see the major averages rally even as the U.S. dollar advanced. Since early December, the inverse relationship between the U.S. dollar and U.S. equities has quietly weakened. For most of this month, the U.S. dollar has steadily advanced but, instead of falling, the major averages have managed to hold their own and move sideways to slighter higher during that period. However, the inverse relationship remains stronger in other dollar denominated assets. For example, gold tumbled nearly -11% from its 2009 high while crude oil slid nearly -15%. Will this be the new norm?
M&A & P/E News:
In recent quarters, U.S. companies are paying some of the largest premiums on record as M&A activity increases. Many analysts believe that this is a sign that executives are growing more bullish about earnings and the economy even after the strongest 8-month rally for the Standard & Poor’s 500 Index in 73 years! Analysts believe that mergers may surge +35% in 2010 and +23% in 2011 as credit begins to flow again. The data, compiled by Sanford C. Bernstein, is based on M&A’s that occurred since 1980. Their research incorporates growth in GDP, corporate earnings and commercial loan volume. That said, the S&P 500’s price to earnings (P/E) ratio is just over 22.2 times its companies’ profits over the past 12 months and is expected to fall to 11.6 when measured against analysts’ 2011 forecast. Of course, the actual results could be different next year but, all things being equal, suggests more M&A news is on the horizon.

Price & Volume Action Is Strong!

It was very encouraging to see the Nasdaq breakout of its current trading range and hit a new 2009 high on Monday! It is also very encouraging to see the Philly Semiconductor Index (SOX) gap higher and hit a fresh 2009 high as well. Meanwhile,the Dow Jones Industrial Average and S&P 500 closed just below 10,500 and 1,120, their respective resistance levels. Apple Inc. (AAPL) closed above its 6-week downward trendline and above its 50 day moving average line which is a healthy sign and bodes well for this 42-week rally.

18 Dec
Daily Market Commentary

Week In Review 12.18.09: Stocks End Mixed As Dollar Rallies!

Friday, December 18, 2009

Market Commentary:

The major averages ended the week mixed as the US dollar continued to rally and investors digested a slew of economic data. Stocks closed higher on Friday as volume, an important indicator of institutional sponsorship, jumped above Thursday’s levels due to quadruple witching. Advancers led decliners by an 11-to-8 ratio on the NYSE and by nearly a 4-to-3 ratio on the Nasdaq exchange. There were 26 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 from the total of 20 issues that appeared on the prior session. New 52-week highs still outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Monday & Tuesday:

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17 Dec
Daily Market Commentary

Stronger Dollar Sends Stocks Lower

Thursday, December 17, 2009

Market Commentary:

The NYSE indices suffered another distribution day after the U.S. dollar vaulted to a three-month high against the euro as concern spread that the Fed-induced rally will end in early 2010. Volume, an important indicator of institutional sponsorship, was reported mixed; higher than Wednesday’s totals on the NYSE, yet lower on the Nasdaq exchange. The lower volume on the Nasdaq helped that index avoid adding another distribution day to its count. Decliners led advancers by more than a 2-to-1 ratio on the NYSE and by nearly a 3-to-1 ratio on the Nasdaq exchange. There were 20 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, substantially down from the total of 53 issues that appeared on the prior session. New 52-week highs still outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data:

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16 Dec
Daily Market Commentary

Stocks End Mixed As Investors Digest A Slew Of Data

Wednesday, December 16, 2009

Market Commentary:

The major averages ended mixed as investors digested a slew of important data: the Fed concluded its last meeting of the year, housing starts topped estimates and consumer prices matched forecasts. Volume, an important indicator of institutional sponsorship, was reported lighter than Tuesday’s totals on the NYSE and on the Nasdaq exchange which signaled large institutions were not aggressively buying or selling stocks. Advancers led decliners by about a 2-to-1 ratio on the NYSE and by nearly a 4-to-3 ratio on the Nasdaq exchange. There were 53 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 total of 42 issues that appeared on the prior session. New 52-week highs substantially outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data: CPI & Housing Starts Ease Fears

At 8:30 AM EST, two important economic reports were released: the consumer price index (CPI) and housing starts. The Labor Department said consumer prices rose by +0.4% in November after gaining +0.3% in October. The headline number matched estimates which helped allay inflation woes. The core rate, which excludes food and energy, was unchanged last month and was below the Street’s estimate for an increase of +0.1%. Elsewhere, the Commerce Department said housing starts, which are registered when construction begins on a new residential building, were in line with estimates and rose +8.9% to an annual rate of 574,000 units. Meanwhile, building permits, a sign of future construction, jumped to the highest level in a year which was an encouraging sign. The pre-market news left investors optimistic about the future because the data signaled that the economy was recovering while inflation remained somewhat contained.

Fed Meeting: Hold Rates Steady 0-0.25%

At 2:15 PM EST, the FOMC concluded its two-day meeting and decided to leave interest rates steady near historical lows of 0-.25%. Time Magazine named Fed Chairman, Ben Bernanke as person of the year thanks to his ability to save the country’s financial system from the worst recession since the WWII. Many economists believe that the US economy will grow over +4% in the fourth quarter of 2009 which will be the fastest pace in almost four years. However, stocks sold off after the Fed’s announcement because many investors believe that keeping rates this low will cause rampant inflation down the road.

Price & Volume Action: Still Healthy

On Wednesday, the major averages closed near important resistance levels as leading stocks were mixed. The Dow Jones Industrial Average and benchmark S&P 500 index closed below 10,500 and 1,115, their respective resistance levels. The Nasdaq composite closed just above 2200 which has served as an important level of resistance for the tech heavy index in recent months.
At this point, the action remains healthy as long as the major averages remain above their respective 50-day moving average lines. So far the market has held up rather nicely to the slew of economic data that was released this week. As long as this action continues, the major averages deserve the bullish benefit of the doubt.

15 Dec
Daily Market Commentary

Stagflation Woes & Stronger Dollar Send Stocks Lower

Tuesday, December 15, 2009

Market Commentary:

The major averages closed lower as investors digested the latest round of disconcerting economic data. Volume, an important indicator of institutional sponsorship, was reported higher than Monday’s totals on the NYSE and on the Nasdaq exchange which marked a distribution day for the major averages. Decliners led advancers by a 23-to-14 ratio on the NYSE and by about a 17-to-10 ratio on the Nasdaq exchange. There were 42 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 total of 51 issues that appeared on the prior session. New 52-week highs substantially outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Stagflation Around The Corner?

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14 Dec
Daily Market Commentary

Dow & S&P 500 Enjoy Best Close of 2009!

Monday, 12.14.09

Market Commentary:

The major averages edged higher on Monday after Abu Dhabi announced it would bail out Dubai World and Exxon Mobil Corp (XOM -4.31%) announced plans to buy XTO Energy Inc. (XTO +15.35%) for $31 billion. Volume, an important indicator of institutional sponsorship, was reported higher than Friday’s totals on the NYSE and on the Nasdaq exchange which was a healthy sign. Advancers led decliners by nearly a 3-to-1 ratio on the NYSE and by about a 2-to-1 ratio on the Nasdaq exchange. There were 51 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 total of 25 issues that appeared on the prior session. New 52-week highs substantially outnumbered new 52-week lows on the NYSE, yet the leadership was less substantial on the Nasdaq exchange.

Dubai Gets Bailed Out!

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11 Dec
Daily Market Commentary

Week In Review- Stocks End Mixed

Friday 12.11.09

Market Commentary:

For the week, the Dow Jones Industrial Average closed higher as the benchmark S&P 500 and the tech-heavy Nasdaq composite closed flat to slightly lower. Volume, an important indicator of institutional sponsorship, contracted compared to the prior week’s totals which was  a somewhat healthy sign as the major average continue building their current bases. New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange which was another welcomed sign.

Monday: The Dollar & Commodities:

Stocks ended mixed on Monday as the dollar edged higher and commodities pulled back. This theme prevailed for most of the week and began on Friday December 4, 2009 when the Labor Department smashed estimates when they released November’s nonfarm payrolls report (employers only cut -11,000 jobs and the unemployment rate eased to 10%, down from a 26-year high of 10.2%). For the week, gold and crude oil got smacked, both pulling back sharply. After rallying for several weeks, on Thursday December 3, 2009 gold negatively reversed after hitting a new all time high of $1,226.40 and hasn’t looked back since. Crude oil slid as below $70 a barrel in New York as demand waned and supply rose.

The Fed:

Federal Reserve Chairman Ben Bernanke gave a speech at the Economic Club of Washington D.C. and said it was too early to determine the sustainability of the recovery. Bernanke also said that he sees modest economic growth in 2010 and does not believe inflation is a threat at this point. He also said that tight credit markets and a 10% unemployment rate could hinder future economic growth.

Tuesday & Wednesday:

Stocks slid on Tuesday after a series of negative headlines hit the wires: tepid economic data was released from Germany, several credit-rating companies highlighted the risk of huge government deficits in the developed world, Greece’s credit rating was downgraded, and Dubai World’s Nakheel PJSC said it lost $3.65 billion. Stocks advanced on Wednesday thanks in part to a late day decline in the US dollar. Japan’s government said that the world’s second largest economy grew at a +1.3% annualized rate last quarter which was way below the +4.8% level reported last month. The sharp downward revision caught nearly everyone off guard and sparked concern that a double dip recession is likely. In Europe, Standard & Poor’s lowered Spain’s credit outlook to “negative” and said they were concerned with the country’s slow economy and massive deficit spending.

Thursday & Friday:

Stocks edged higher on Thursday after positive trade data offset concerns about an increase in weekly unemployment claims. Before Thursday’s opening bell, the Labor Department said jobless claims topped expectations and rose last week to 474,000 after falling for five straight weeks. However, the bulls found comfort in the fact that the four-week average, which smooths out the data and is less volatile, slid to its lowest level since September 2008. Elsewhere, the Commerce Department said the trade deficit narrowed to $32.9 billion in October. The report showed that exports surged in October thanks in part to a weaker dollar. Furthermore, this was the sixth consecutive month that exports rose which bodes well for the US economy.
On Friday, investors cheered after two better-than-expected reports were released: retail sales and consumer confidence. However, stocks came under a little pressure in the afternoon when the House of Representatives passed legislation to create a Consumer Financial Protection agency which will monitor risk at large financial firms.

Important Support & Resistance Levels:

Looking at the recent action in the market, the major averages continue acting well as long as they remain perched just below resistance (their respective 2009 highs) and above their respective 50-day moving average (DMA) lines. Both these factors are considered healthy and bode well for this 8-month rally. The Nasdaq continues to experience formidable resistance just above 2,200 while the benchmark S&P 500 Index faces resistance just above 1,115. The blue chip Dow Jones Industrial Average remains the strongest of it peers and currently faces resistance just above 10,500. Until the major averages close above or below support or resistance, expect the bracketed (sideways) action to continue.

10 Dec
Daily Market Commentary

Stocks Edge Higher On Mixed Volume

Thursday 12.10.09

Market Commentary:

Stocks rallied on Thursday after healthy trade data helped offset concerns about an increase in weekly unemployment claims. Volume, an important indicator of institutional sponsorship, was mixed when compared to Wednesday’s levels; lower on the NYSE and higher on the Nasdaq exchange. There were 24 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, greater than the total of 13 issues that appeared on the prior session. New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data:

Before Thursday’s opening bell, the Labor Department said jobless claims topped expectations and rose last week to 474,000 after falling for five straight weeks. However, the bulls found comfort in the fact that the four-week average, which smooths out the data and is less volatile, slid to its lowest level since September 2008. Elsewhere, the Commerce Department said the trade deficit narrorwed to $32.9 billion in October. The report showed that exports surged thanks in part to a weaker dollar. In addition, exports rose for a sixth consecutive month which bodes well for the U.S. economy.

Timothy Geithner on Capital Hill:

Treasury Secretary Timothy Geithner testified before the Congressional Oversight Panel on Thursday. Geithner wants the government to extend the $700 billion TARP plan as the financial system recovers from last year’s crisis. He said that extending the TARP plan will help U.S. banks remain properly capitalized. Remaining properly capitalized will help financial institutions address potential threats that may arise in the future. Doing this will reduce the need for future government intervention if another financial shock occurs.

Afternoon Weakness:

Around 2:30pm EST, the bears showed up and put pressure on the major averages. The small cap Russell 2000 index turned lower and slid into negative territory after being up for most of the day. The small cap index closed just above its 50 day moving average as it continues working on the right side of its current base. It is also important to note that since the March low, small caps have outperformed their larger cap brethren. However, since the end of Q3, that relationship reversed and large caps are currently outperforming their peers. Leadership remains scarce as many stocks continue building bases.

09 Dec
Daily Market Commentary

Late Dollar Decline Lifts Stocks

Market Commentary

The major averages ended higher thanks in part to a late day decline in the US dollar. Volume, an important indicator of institutional sponsorship, was lower than Tuesday’s levels on both major exchanges which signaled that large institutions were not aggressively buying stocks. It was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and on the Nasdaq exchange.

Tepid Economic Data Weighed On Stocks

Stocks were under pressure for most of the session after disconcerting economic data was released from Europe and Asia. In Asia, Japan’s government said that the world’s second largest economy grew at a +1.3% annualized rate last quarter. Not only was this way below estimates but it fell short of the +4.8% initial rate reported last month. The sharp downward revision caught nearly everyone off guard and sparked concern that a double dip recession may actually occur. In Europe, Standard & Poor’s lowered Spain’s credit outlook to “negative” and said they were concerned with the country’s slow economy and massive deficit spending. This occurred one day after a separate rating agency downgraded Greece’s credit rating. Stocks in Greece plunged this week as investors scramble to move into “safer” assets.

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