Another Positive Week On Wall Street

Please Note: After Nearly 10 Years of writing our daily stock market commentary, due to time constraints, this will become a weekly note-
Starting May 1, 2012.
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Friday, April 27, 2012
Stock Market Commentary:

Stocks and a slew of other “risk assets” were quiet on Friday after Spain was downgraded by S&P and the first reading on Q1 U.S. GDP was announced. As earnings and economic data continues to be released in droves, it is paramount that we not only pay attention to the actual numbers but how the stocks (and major averages) react to the numbers. This allows us to see how the market participants are “voting” and helps us filter out the noise and focus on what matters most: price action. We find it encouraging to see all the major averages jump back above their respective 50 DMA lines in the wake of Apple’s blow-out quarter.

Monday-Wednesday’s Action: Apple’s Earnings Smash Estimates!

Stocks and a slew of risk assets fell on Monday after a slew of economic and political data questioned the health of the global recovery. Overnight, China said its manufacturing sector contrcated for the sixth consecutive month which is not ideal. Germany’s manufacturing index also contracted which was also a surpise. Spain’s economy contracted in Q1 for the first time several years. The Dutch cabinet resigned after failing to pass much needed austerity measures. In the first round of presidential elections, French voters were mixed but largely expressed a negative view for the Sarkozy administration. According to CNBC.com, this was the first time an incumbent French president came second in the first-round vote in the present electoral system’s 54-year history. The second round will be held in two weeks. This bodes poorly for the political capital behind the current EU bailout plan. Especially, if citizens of other countries in the E.U. do not want austerity, the ramificaitons could be deleterious.

Stocks rallied on Tuesday even after the latest housing data was not ideal. The S&P Case-Shiller index, which measures home prices in 20 metropolitan areas around the country, fell for a sixth straight month. A separate report showed that new home sales plunged -7.1% which was the largest drop in almost a year and is not ideal for the ailing housing market, the jobs market, or the broader economy. The Conference Board said its consumer confidence index fell which is not ideal.

Stocks and a slew of risk assets opened higher on Wednesday as investors looked passed a disappointing durable goods number and focused on a much stronger-than-expected earnings report from Apple Inc. (AAPL). The Commerce Department said total durable goods orders fell by -4.2% during March which missed the Street’s estimate for a decline of -1.7%. Excluding transportation items, durable goods orders fell by -1.1%, which still missed the Street’s estimates for a gain of +0.5%. The Fed concluded its two-day meeting, held rates steady, and largely reiterated their recent data-dependent stance regarding future policy. For months, the U.S. Fed has taken a “wait-and-see” approach for handling policy and whether or not to initiate another round of QE (i.e. stimulus).

Thursday & Friday’s Action: Stocks Are Resilient

Stocks and a slew of risk assets rallied on Thursday as they digested Wednesday’s strong move and the latest round of mixed to weaker-than-expected economic and earnings data. Before Thursday’s open, the Labor Department said weekly jobless claims slid by 1,000 to a seasonally adjusted 388,000. However, the closely watched four-week moving average rose by 6,250 to 381,750 which was the highest reading since January and topped the Street’s estimate for 375,000. Separately, pending home sales rose +4.1% to 101.4 which topped the Street’s estimate for 96.  A slew of earnings were released and were mixed to slightly lower. After Thursday’s close, S&P downgraded Spain’s rating by two notches but Spain’s primary stock market and the euro both rallied. When a market doesn’t fall on negative news, it is usually a subtle sign of strength. Stocks were quiet on Friday after the U.S. said Q1 GDP grew by +2.2% which missed the Street’s expectation.

Market Outlook- Confirmed Uptrend

From our point of view, the market back in a confirmed uptrend as the bulls appear to have regained control of this market. The major averages are back above their respective 50 DMA lines and short term downward trendlines (shown above) which is very healthy. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!