Major Averages Back Above 50 DMA Lines!

Stocks and other risk assets were mostly higher on Tuesday, snapping the recent sell-off. So far the reaction to Q1 earnings has been less than stellar. As earnings continue to be released in droves, it is paramount that we not only pay attention to the actual numbers but how the stocks (and major averages) react to the numbers.  This allows us to see how the market participants are “voting” and helps us filter out the noise and focus on what matters most: price action. The the Nasdaq composite, Dow Jones Industrial Average, and the benchmark S&P 500 index are back above their respective 50 DMA lines which bodes well for the bulls. The small-cap Russell 2000 index is still below that closely followed level.

Stronger than Expected Earnings Help Stocks:

Stocks opened higher on Tuesday as investors digested the latest round of earnings and economic data. A slew of large profile companies released their Q1 earnings before Tuesday’s open ranging from Goldman Sachs (GS, to Johnson & Johnson (JNJ). Meanwhile, the economic data was not ideal. The Commerce Department said housing starts fell an expected -5.8% to a seasonally adjusted annual rate of 654,000 units in March. This missed the Street’s estimate for 705,000 and it was also disconcerting to see February’s reading be revised down to 694,000. Meanwhile, industrial production was unchanged for a second straight month in March which missed a gain of +0.3%.

Market Outlook- In A Correction