Stocks Consolidate Recent Decline

Wednesday, November 17, 2010
Stock Market Commentary:

Stocks and commodities ended mixed one day after the 12-week rally came to an end. The rally which began on the September 1, 2010 follow-through day ended on Tuesday as stocks and commodities plunged in heavy trade. The major averages have suffered an ominous series of distribution days in a short period of time which suggests sellers are gaining traction.

Consumer Price Index Tame, Housing Starts Fall, EU Debt Woes Ease:

The euro squeezed out a small gain after CPI fell short of analyst estimates and housing starts plunged. The weaker dollar helped the major averages end relatively flat on the day. Overseas, the European Union has agreed in principle to help bailout Ireland. Looking forward, the two important questions are: 1.) how many more countries will need to be bailed out? 2.) How many more countries can the EU afford to bailout? Thursday will be an interesting day as GM will begin trading (it is expected to be the largest IPO in US history) and a slew of economic data is slated to be released.

Market Action- 12 Week Rally Ends – In A Correction:

The 12-week rally ended on Tuesday, November 16, 2010 after the major averages plunged in heavy volume back down towards their respective 50 DMA lines. In recent weeks, we have repeatedly written about how the major averages were experiencing wide-and-loose action after a big move and made it very clear that that was not a healthy sign. At this point, we are looking for a new rally to be confirmed with a new follow-through day before taking any new positions. Caution and patience are key at this point. Trade accordingly.

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