Stocks Down; Dollar Up

Wednesday, March 24, 2010
Market Commentary:

The major averages, US Treasuries, the euro and a slew of commodities pulled back as the dollar advanced after Portugal’s debt was downgraded by Fitch.The volume total on the NYSE was about even compared to Monday’s totals, while volume was reported slightly higher on the Nasdaq exchange. Decliners led advancers by more than a 2-to-1 ratio on the NYSE and on the Nasdaq exchange. There were 29 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 77 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

Euro Tanks As Dollar Rallies:

Overnight, Fitch Ratings downgraded Portugal due to its ballooning debt concerns. This, coupled with the fact that France and Germany are close to reaching a deal with the IMF to rescue Greece sent the euro plunging. Investors are concerned that more European countries will need to be bailed out as they struggle to deal with their mounting debt. The euro fell against 12 of its 16 peers and hit a new 10-month low against the greenback. The US dollar rallied which put pressure on US stocks and commodities. The Reuters/Jefferies CRB Index of commodities slid to a five-week low, dragged lower by oil, gold, sugar, and copper.

Economic Data Mixed:

Economic data was mixed on Wednesday: durable goods were up while new home sales fell. Durable goods topped estimates and rose for a third consecutive month which was a healthy sign for the economic recovery. Meanwhile, new home sales fell -2.2% to a 308,000 annual rate. Overseas, Europe received some healthy economic data: European services and manufacturing grew at the fastest pace since August 2007 and German business confidence rose.

Market Action- Confirmed Rally:

The fact that there has only been two distribution days since the follow-though-day (FTD) bodes well for this nascent rally. It is also a welcome sign to see the market rally on both positive and negative news. Each week, investors continue to send the market higher after digesting the latest round of stronger than expected economic and earnings data. Remember that now that a new rally has been confirmed, the window is open to proactively be buying high quality breakouts meeting the investment system guidelines. Trade accordingly.

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