Stocks End Near Highs; Economic Data Weak


Thursday, July 1, 2010
Stock Market Commentary:

Stocks, commodities and the dollar fell after a series of lackluster economic data sparked concern that the global economic recovery is faltering. Thursday’s volume totals were reported higher on the NYSE and the Nasdaq exchange compared to Wednesday’s levels. Decliners led advancers by a 23-to-16 ratio on the NYSE and by a 9-to-5 ratio on the Nasdaq exchange. There was only 1 high-ranked company from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, lower from the 4 issues that appeared on the prior session. Meanwhile, new 52-week lows substantially outnumbered new 52-week highs on the NYSE and the Nasdaq exchange. As leadership evaporated in recent sessions, in this commentary it was repeatedly noted – “Without a healthy crop of leaders hitting new highs it is hard for the major averages to sustain a rally.”

Lackluster Economic Data Sparks A World Wide Sell Off:

Overnight, stocks fell in Europe and Asia after weaker than expected manufacturing reports were released. The weakness spilled over to the US when a series of tepid economic reports were released. US jobless claims unexpectedly rose to 472,000 last week, pending home sales tanked at twice the rate Wall Street had expected and US manufacturing echoed the ominous news from Europe and Asia. This was the latest round of tepid economic data which suggests the economic recovery is less than stellar.  

Market Action- In A Correction:

Some might say that Thursday marked day 1 of a new rally attempt due to the fact that the major averages closed in the upper half of their intraday ranges, recovering from steep losses in the first half of the session. That still does not change the fact that the market is in a correction which emphasizes the importance of raising cash and adopting a strong defensive stance until a new follow-through day emerges. For the past several weeks, this column has steadily noted the importance of remaining very selective and disciplined because all of the major averages are still trading below their downward sloping 50-day moving average (DMA) lines. Their 50 DMA line may continue to act as stubborn resistance. It was also recently noted that the NYSE Composite Index’s 50 DMA line already sliced below the 200 DMA line, an event known by market technicians as a “death cross” which usually has bearish implications. Trade accordingly.

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