QE 3 Is Officially In The Cards; Another Weak Close!


Wednesday, July 13, 2011
Stock Market Commentary:

Stocks edged higher on Wednesday after China’s GDP topped estimates and Fed Chairman Ben Bernanke said the door remains open for an additional round of monetary easing if the economy continues to slow. It was encouraging to see the major averages bounce off their 50 DMA lines which remains the next logical area of support. Once the major averages violate their respective 50 DMA lines, the rally will end and the bears will have regained control of this market. However, for the fourth consecutive day, it was a bit worrisome to see the market open higher and close near the session’s lows which is not ideal. Looking forward, the next level of resistance is their respective 2011 highs.

China’s GDP, QE 3, and Bombs Explode In Mumbai:

Before Wednesday’s open, China said its gross domestic product (GDP) slowed to a rather strong +9.5% last quarter. This was slightly lower than Q1’s strong reading of +9.7% but slightly higher than the Street’s +9.4% expectation. It is important to note that Beijing has been rather vocal in their attempts to curb inflation and their red-hot economy. In the U.S., Ben Bernanke made it abundantly clear that the Fed is willing to step up and ease monetary policy (i.e. QE 3) again, “if needed.” This sent the dollar lower and a slew of dollar denominated assets (i.e. risk assets) higher. On a rather sad note, a series of bombs rocked the financial district of Mumbai, killing at least 21 people and injuring 141 in what most believe to a terrorist attack.

Market Outlook- Uptrend Under Pressure:

The last week of June’s strong action suggests the market is back in a confirmed rally. As our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the current rally is under pressure as investors patiently await earnings season and continue to digest the latest economic data. Until the major averages violate their respective 50 DMA lines on a closing basis, the market deserves the bullish benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.


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