Stocks End Mixed As Volume Recedes

Monday 12.07.09

Market Commentary:

The stock market ended mixed on Monday after trading in a very tight range for most of the session. Volume, an important indicator of institutional sponsorship, was lower than Friday’s levels on both major exchanges which suggested large institutions were not aggressively selling stocks. Advancers led decliners by about a 10-to-9 ratio on the NYSE and were roughly even 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, less than the total of 45 issues that appeared on the prior session. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs this week has been a welcome improvement. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Bernanke Speaks:

Stocks vacillated between positive and negative territory as the dollar edged higher and a slew of commodities continued pulling back. The light volume day was considered healthy as investors digested Friday’s news-dominated session. Gold closed lower for the third straight day and has shed over 100 points after hitting a new all time high last Thursday. In the early afternoon, Federal Reserve Chairman Ben Bernanke gave a speech at the Economic Club of Washington D.C. and said it was too early to determine the sustainability of this recovery. Bernanke also said that he sees modest economic growth in 2010 and, at this point, does not believe inflation is a threat. He also said that tight credit markets and a 10% unemployment rate could hinder future economic growth.

Jobs Report; Bittersweet

Last Friday’s stronger than expected jobs report was bittersweet. At face value, the report is a net positive for the economy because it shows that employers may begin adding jobs in the near future. However, it also suggests that the Fed may begin raising rates as the economy improves. Currently, the Fed’s overnight lending rate stands near a historical low of 0-.25% which is sharply lower than the +5.25% seen in early 2007 just before the financial crisis began. That coupled with a weaker dollar has played a pivotal role in the robust 8-month rally we have seen in equities. Dr. Bernanke reaffirmed the Fed’s position that interest rates will likely remain low for an extended period of time but reiterated the importance of analyzing future economic data as it emerges.

Analyzing Price & Volume:

Looking at the recent action in the market, the major averages continue acting well as they remain perched just below resistance (their respective 2009 highs) and above their respective 50 day moving average (DMA) lines. Both these factors are considered healthy which bodes well for the bulls. The Nasdaq continues to experience formidable resistance just above 2,200 while the benchmark S&P 500 faces resistance just above 1,115. The blue chip Dow Jones Industrial Average remains the strongest of it peers and currently faces resistance just above 10,500. Until the major averages close above resistance or below support (their 50 DMA lines) levels, expect the bracketed (sideways) action to continue.

Sarhan In the Media!

In case you missed it- Mr. Sarhan was quoted in an article that appeared on the  WSJ.com, Investors.com and MarketWatch.com this morning.

Radio Appearance- At 1:30 EST Mr. Sarhan was interviewed on CBS Radio Chicago-WBBM.