Wednesday, January 18, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets were relatively quiet on Wednesday after IMF was rumored to be working on a plan to bailout the euro and the U.S. producer price index (PPI) did not indicate inflation was a threat at this point. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line (shown above). Looking forward, the market is doing its best to make its way above Q4 2011’s high (~1292) and now has its sights set on its 2011 highs near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above its 200 DMA line.
IMF Bailing Out The Euro? Corporate Earnings Mixed, & Inflation Remains Tame
On Wednesday, stocks were relatively quiet after rumors spread that the IMF was working on a last minute plan to bailout the euro. Corporate data in the U.S. was mixed to slightly higher. Goldman Sachs (GS) was one of the many companies to release earnings on Wednesday. The investment bank topped estimates but saw earnings and sales contract compared to the same levels in the prior year (2010). Meanwhile, the Labor Department said the producer price index unexpectedly fell by -0.1% which missed the Street’s expectation for a gain of +0.1%.
Market Outlook- New Rally Confirmed
Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1260). Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. 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!