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?
Before Tuesday’s opening bell, two tepid economic reports were released which suggested stagflation may be on the horizon (higher inflation coupled with low economic activity). The producer price index (PPI) surged while the Empire State manufacturing index plunged. Surging energy prices played a primary role in sending the headline PPI number higher in November but investors were concerned when core prices (which exclude food and energy) also rose. The headline number jumped +1.8% after increasing by +0.3% in October. Not only was the reading sharply higher than October’s reading but it also smashed the Street’s estimate for a +1% increase and was the first year on year increase in several quarters. Elsewhere, manufacturing in the New York region fell short of analysts’ estimates and barely came in above zero for December. In addition, the 2.55 reading was way below November’s reading of 23.51 and October’s total of 34.57, suggesting lackluster growth. Elsewhere, the U.S. dollar rallied on the news which also put pressure on stocks.
Housing Recovery? Almost.
At 1:00pm EST, the National Association of Home Builders released its housing market index. The index, which rates the overall economy and housing market conditions, fell 1 point in December to 16 which is a very low reading. Respondents are still concerned that credit conditions remain very tight which hinders the buyer’s ability to make new purchases. However, it was encouraging to see a slew of housing stocks (BZH, NVR, HOV, etc.) rally on the news.
Price & Volume Action: Still Healthy.
On Tuesday, each of the major averages pulled back from logical resistance levels as leading stocks were mixed. The Dow Jones Industrial Average and benchmark S&P 500 index closed just 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. A slew of economic data is slated to be released this week and, as always, it will be very important to see how the market reacts to that news. On Wednesday, the Federal Reserve will conclude its 2-day meeting and announce its decision on interest rates. The consumer price index (CPI) and housing starts are also slated to be released tomorrow.
Host Of The #SmartMoneyCircle Podcast, Founder and CEO of 50 Park Investments. Adam provides weekly market updates to ChartYourTrade.com readers. He is a FORBES Contributor and is a frequent guest on all the major financial media outlets.
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Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.
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?
Before Tuesday’s opening bell, two tepid economic reports were released which suggested stagflation may be on the horizon (higher inflation coupled with low economic activity). The producer price index (PPI) surged while the Empire State manufacturing index plunged. Surging energy prices played a primary role in sending the headline PPI number higher in November but investors were concerned when core prices (which exclude food and energy) also rose. The headline number jumped +1.8% after increasing by +0.3% in October. Not only was the reading sharply higher than October’s reading but it also smashed the Street’s estimate for a +1% increase and was the first year on year increase in several quarters. Elsewhere, manufacturing in the New York region fell short of analysts’ estimates and barely came in above zero for December. In addition, the 2.55 reading was way below November’s reading of 23.51 and October’s total of 34.57, suggesting lackluster growth. Elsewhere, the U.S. dollar rallied on the news which also put pressure on stocks.
Housing Recovery? Almost.
At 1:00pm EST, the National Association of Home Builders released its housing market index. The index, which rates the overall economy and housing market conditions, fell 1 point in December to 16 which is a very low reading. Respondents are still concerned that credit conditions remain very tight which hinders the buyer’s ability to make new purchases. However, it was encouraging to see a slew of housing stocks (BZH, NVR, HOV, etc.) rally on the news.
Price & Volume Action: Still Healthy.
On Tuesday, each of the major averages pulled back from logical resistance levels as leading stocks were mixed. The Dow Jones Industrial Average and benchmark S&P 500 index closed just 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. A slew of economic data is slated to be released this week and, as always, it will be very important to see how the market reacts to that news. On Wednesday, the Federal Reserve will conclude its 2-day meeting and announce its decision on interest rates. The consumer price index (CPI) and housing starts are also slated to be released tomorrow.
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Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.
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