Stocks End Higher On Light Volume

Thursday, March 11, 2010
Market Commentary:

The major averages edged higher after China said inflation jumped last month and mixed economic data was released. Volume totals were reported lower than the prior session on both major exchanges. Advancers led decliners by a 23-to-15 ratio on the NYSE and by nearly a 15-to-11 margin on the Nasdaq exchange. There were 35 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, down from the 50 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

Chinese Inflation:

Overnight, China said inflation rose +2.7% in February, up from +1.5% in January. For the past few months, China has taken several steps to curb inflation and its robust economy. Their actions sent stocks lower as many people were concerned about what the ramifications would be for the ongoing economic recovery. Therefore, the higher reading on inflation could cause China to raise interest rates which could inturn hinder the economic recovery. 

Mixed Economic Data- Weekly Jobless Claims & Trade Data: 

In the US, two important economic reports were released: weekly jobless claims and the latest trade data. The Labor Department said weekly jobless claims fell by 6,000 to 462,000 which was a positive sign. Elsewhere, the Commerce Department said the trade deficit contracted in January due to a large drop in imported oil and cars. The report also showed that US exports slid -0.3% which was concerning because the drop in overseas sales could slow the recovery.

Market Action- Confirmed Rally:

Looking at the market, since the March 1, follow-through-day (FTD) the market and a batch of leading stocks steadily rallied. The fact that we have not seen any serious distribution days since the FTD bodes well for this nascent rally. It is also a welcome sign to see the market continue to improve as investors digest 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 start buying high quality breakouts. Trade accordingly.