Stocks Score A FTD, New Rally Confirmed!


Tuesday, June 15, 2010
Stock Market Commentary:

The current rally was confirmed after all the major averages scored a proper follow-through day (FTD) on Tuesday. Volume totals were reported higher on the Nasdaq and the NYSE. Advancers led decliners by a 5-to-1 ratio on the NYSE and nearly a 4-to-1 ratio on the Nasdaq exchange. There were 37 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, higher than the 31 issues that appeared on the prior session.  New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Stocks Rally As Dollar Falls For 6th Consecutive Day:

The MSCI World Index advanced for a sixth consecutive day as the greenback continued its six day slide after a New York manufacturing report suggested the global economy remains strong. The Federal Reserve Bank of New York’s general economic index, which measures economic activity in the NY area, rose for an 11th consecutive month which helped offset European Debt woes. The weaker dollar helped a slew of dollar denominated assets (mainly stocks & commodities) rally. Elsewhere, oil jumped above $76 a barrel and the euro rose above $1.23.

Market Action- Confirmed Rally:

The Nasdaq composite, S&P 500, Dow Jones Industrial Average, and NYSE composite confirmed their latest rally attempt and produced a sound FTD which means the window is now open to begin buying high-ranked stocks again. Technically, it was encouraging to see the Dow Jones Industrial Average and the benchmark S&P 500 index close above their respective 200 DMA lines.

At this point, the S&P 500 is down -8.5% from its 19-month high of 1,219 and managed to close above resistance (200 DMA line) of its latest trading range.  Looking forward, the 200 DMA line should now act as support as this market continues advancing. Remember to remain very selective because all the major averages are still trading below their downward sloping 50 DMA lines. It is important to note that approximately +75% of FTD’s lead to new sustained rallies, while +25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

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