Stocks closed with modest gains on Monday as fears subsided that Ben S. Bernanke may not be reconfirmed as chairman of the Federal Reserve. Volume was reported lower than Friday’s session on the Nasdaq exchange and on the NYSE which suggested large institutions were not aggressively buying stocks. Monday’s gains were enough to mark Day 1 of a new rally attempt for the major averages. Advancers led decliners by a 23-to-16 ratio on the NYSE and were about even on the Nasdaq exchange. 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. New 52-week highs still outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.
Hong Kong Stock Market Falls -10% From Recent High:
On Friday, January 22, US stocks ended their 46 week rally and entered a correction when all the major averages plunged below their respective 50 DMA lines. Since the March 2009 low, none of the major averages fell more than -10% from their post recovery highs which reiterates how strong this market actually is. Even other developed markets overseas have performed rather well over the past 10 months. However, the Hang Seng Index, Hong Kong’s stock market, fell -10% from its recent high which could drag the rest of the world lower if the selling continues.
Earnings Data:
The latest round of corporate earnings continue to top analysts’ estimates but fail to impress Wall Street. This week alone, more than 130 companies in the benchmark S&P 500 are slated to report their Q4 results. Barring some unforeseen event, earnings will have expanded nearly +70% and snapped a record nine-quarter losing streak. Longstanding readers of this column know that in addition to analyzing the numbers we pay equal, if not more, attention to how the market reacts to the numbers. So far, the reaction has been tepid at best.
Existing Home Sales Plunge:
On the economic front, existing home sales plunged in December and missed estimates even though home prices held steady during the month. The report showed sales skidded -16.7% for the largest monthly drop in over 40 years! Meanwhile, the annual rate of 5.45 million units fell short of the Street’s estimate for 5.90 million. The data showed that sales plunged across all regions of the country, especially the Midwest, and were split evenly between single-family homes, down -16.8% to a 4.79 million rate, and condos, down -15.4% to 0.66 million. However, investors were pleased that prices actually rose +4.9% on the median to $178,300 and up +6.4% on the average to $225,400.
Market Action: Day 1 of a New Rally Attempt, Market In A Correction
Looking at the market, Monday marked Day 1 of a new rally attempt which means that as long as Monday’s lows are not breached, the earliest a possible follow-through day could emerge will be this Thursday. However, if Monday’s lows are taken out, then the day count will be reset and the chances for a steeper correction increases markedly. It is also important to see how the major averages react to their respective 50 DMA lines. Until they all close above that important level then there will be a lot of technical damage on the chart. So far, the market’s reaction has been poor to the latest round of economic and earnings data which remains a concern. Remember that the recent series of distribution days coupled with the deleterious action in the major averages suggests large institutions are aggressively selling stocks which warrants caution. Disciplined investors will now wait for a new follow-through day to be produced before resuming any buying efforts. Until then, patience is key.
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.
Day 1 Of A New Rally Attempt
Monday, January 25, 2010
Market Commentary:
Stocks closed with modest gains on Monday as fears subsided that Ben S. Bernanke may not be reconfirmed as chairman of the Federal Reserve. Volume was reported lower than Friday’s session on the Nasdaq exchange and on the NYSE which suggested large institutions were not aggressively buying stocks. Monday’s gains were enough to mark Day 1 of a new rally attempt for the major averages. Advancers led decliners by a 23-to-16 ratio on the NYSE and were about even on the Nasdaq exchange. 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. New 52-week highs still outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.
Hong Kong Stock Market Falls -10% From Recent High:
Earnings Data:
The latest round of corporate earnings continue to top analysts’ estimates but fail to impress Wall Street. This week alone, more than 130 companies in the benchmark S&P 500 are slated to report their Q4 results. Barring some unforeseen event, earnings will have expanded nearly +70% and snapped a record nine-quarter losing streak. Longstanding readers of this column know that in addition to analyzing the numbers we pay equal, if not more, attention to how the market reacts to the numbers. So far, the reaction has been tepid at best.
Existing Home Sales Plunge:
On the economic front, existing home sales plunged in December and missed estimates even though home prices held steady during the month. The report showed sales skidded -16.7% for the largest monthly drop in over 40 years! Meanwhile, the annual rate of 5.45 million units fell short of the Street’s estimate for 5.90 million. The data showed that sales plunged across all regions of the country, especially the Midwest, and were split evenly between single-family homes, down -16.8% to a 4.79 million rate, and condos, down -15.4% to 0.66 million. However, investors were pleased that prices actually rose +4.9% on the median to $178,300 and up +6.4% on the average to $225,400.
Market Action: Day 1 of a New Rally Attempt, Market In A Correction
Looking at the market, Monday marked Day 1 of a new rally attempt which means that as long as Monday’s lows are not breached, the earliest a possible follow-through day could emerge will be this Thursday. However, if Monday’s lows are taken out, then the day count will be reset and the chances for a steeper correction increases markedly. It is also important to see how the major averages react to their respective 50 DMA lines. Until they all close above that important level then there will be a lot of technical damage on the chart. So far, the market’s reaction has been poor to the latest round of economic and earnings data which remains a concern. Remember that the recent series of distribution days coupled with the deleterious action in the major averages suggests large institutions are aggressively selling stocks which warrants caution. Disciplined investors will now wait for a new follow-through day to be produced before resuming any buying efforts. Until then, patience is key.
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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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