Busy News Day; Quiet Reaction


Thursday, January 13, 2011
Stock Market Commentary:

The major averages were quiet on a rather busy news day. Heretofore, market internals remain healthy evidenced by broad leadership, favorable volume patterns, a rising advance/decline line, and a healthy number of new highs on both major exchanges.

Bank of England & ECB Hold Rates Steady, Spain’s Debt Sells, U.S. Economic Data:

On Thursday, the Bank of England (BOE) & the European Central Bank  (ECB) held rates steady at record lows and reaffirmed their stimulus measures as the global economy continues to recover. The BOE said it is concerned that inflation is above the government’s +3% limit as it sits at a six-month high. Spain’s debt auction went well which helped allay concerns that the 10th largest economy will need to be bailed out in the near future. In The U.S, the producer price index (PPI)  rose +1.1% from November and topped the +0.8% estimate. Core prices, which exclude food and energy, rose +0.2% which matched estimates. Jobless claims rose to their highest level since October. Elsewhere, the U.S. trade deficit unexpectedly contracted in November to the lowest level in 10 months. The decline was due to faster growth in overseas markets coupled with a weak dollar which boosted demand for U.S. goods and services. The consumer price index, advance retail sales, consumer confidence, and industrial production are all slated to be released on Friday.

Market Action- Market In Confirmed Rally Week 20

It was encouraging to see the bulls show up in November and defend the major averages’ respective 50 DMA lines. The market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. Put simply, stocks are strong. Trade accordingly. If you are looking for specific high ranked ideas, please contact us for more information.

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