Stocks Edge Higher After Retesting 200 DMA Line


Thursday, June 17, 2010
Stock Market Commentary:

The major averages ended slightly higher as investors digested a slew of economic data and BP’s (BP) CEO spent the day testifying on Capital Hill. Volume totals were reported lower on both major exchanges, which signaled that large institutions were not aggressively selling stocks. Advancers were about even with decliners on the NYSE and on the Nasdaq exchange as the major averages continued consolidating Tuesday’s large move. There were 22 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, lower than the 35 issues that appeared on the prior session.  New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Investors Digest A Slew of Economic Data: Jobless Claims, CPI, & Leading Indicators:

Before Thursday’s opening bell, the Labor Department said US jobless claims rose to 472,000 last week and the consumer price index slid which helped allay inflation woes. After the bell, the Federal Reserve Bank of Philadelphia’s general economic index fell to a 10-month low of 8, less than half the median estimate of Wall Street economists. The Conference Board’s index of leading indicators in April edged down -0.1%, following a +1.3% increase in the prior month.

Stock Market Action- Confirmed Rally:

The major averages confirmed their latest rally attempt on Tuesday, June 15, 2010 when they produced a sound follow-through day. Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. Technically, it was encouraging to also see the Dow Jones Industrial Average and the benchmark S&P 500 Index rally above their respective 200-day moving average (DMA) lines. Looking forward, the 200 DMA line should now act as support as this market continues advancing, while any reversal would be a worrisome sign.

Remember to remain very selective because all of the major averages are still trading below their downward sloping 50 DMA lines.  It was somewhat disconcerting to see volume remain light (below average) behind the confirming gains. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

Are You Ready For This NEW Confirmed Rally?

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