Nasdaq Retreats; Other Major Averages Advance

Thursday, January 7, 2010
Market Commentary:

The major averages ended mixed after positive retail sales and weekly jobless claims were released. Volume, an important indicator of institutional sponsorship, was reported about even to slightly higher than Wednesday’s totals which indicated large institutions were accumulating, not distributing, stocks. Advancers led decliners on both major exchanges which was a positive sign. There were 32 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 57 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, and new lows were again near the single digits.

Jobless Claims:

At 8:30AM EST, the Labor Department said new claims for unemployment benefits rose less than forecast to +434,000 in the week of January 2, 2010. Every Thursday, the Labor Department releases the report which compiles data showing the number of individuals who filed for unemployment insurance for the first time. Remember, the report is counter intuitive because an increasing number means more people are filing for unemployment claims and suggests the labor market is waning. The converse is also true, lower readings is a sign of strength. Investors tend to look at the four-week moving average because it smoothes out weekly volatility. Investors are now focused on December’s employment report which is slated to be released before Friday’s opening bell. Analysts believe that last month’s reading will be unchanged which bodes well for the ailing jobs market. So far, since the recession began, US employers slashed over 7 million jobs as the unemployment rate hit a two decade high of 10.2% in the fourth quarter.

Chain Stores Report Healthy Retail Sales Data:

Before Thursday’s opening bell, chain stores across the country released retail sales figures for December. On average, retail sales were reported higher at many chain stores last month which helped send many of their shares higher. The stronger than expected data also bodes well for last quarter’s GDP.

High-end jeweler, Tiffany & Co. (TIF +4.29%), surged to a new 52-week high on heavy volume after reporting solid figures. Even several low-end retailers rallied, TJX Cos (TJX +5.11%) which operates TJ MAXX and Marshalls, gapped above its 50 day moving average line on monstrous trade. Sears Holdings (SHLD +11.60%) gapped to its highest price since September 2008 after the largest US department-store chain’s fourth-quarter profit topped analysts’ estimates. The company reported its Kmart division sold more toys, clothing and home goods during the holiday season which helped the bottom line. Even Bed Bath & Beyond (BBBY +6.91%) gapped higher, hitting its highest price since February 2007, after the country’s largest home-furnishings retailer raised guidance for 2010 and reported stronger than expected third-quarter earnings.

Market Action- Price & Volume:

Stocks remain strong as investors digested the latest round of economic data. The benchmark S&P 500, Dow Jones Industrial Average, NYSE composite, mid-cap S&P 400, small-cap Russell 2000 and small-cap S&P 600 indices all enjoyed fresh recovery closing highs!

The current rally is in its 44th week (since the March 12, 2009 follow-through day) and on all accounts still looks very strong. In addition, most bull markets last for approximately 36 months, so the fact that we are beginning our 10th month suggests we have more room to go. December’s jobs report will likely set the stage for the next near term move for the major averages but until support is broken (50 DMA lines for the major averages), this rally deserves the bullish benefit of the doubt.