Tuesday, September 21, 2010
Stock Market Commentary:
Stocks negatively reversed after the Federal Reserve decided to hold rates steady near record lows and left the door open for further economic stimulus. Tuesday marked a distribution day for the major averages as volume topped Monday’s levels on the NYSE and on the Nasdaq exchange. Decliners led advancers by about a 2-to-1 ratio on the NYSE and on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange. There were 81 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 101 issues that appeared on the prior session.
Housing Starts Top Estimates:
Before Tuesday’s open, housing starts, which are registered at the start of construction for a new home, unexpectedly grew in August. The reading topped estimates and helped signal a possible bottom to this 4-year housing meltdown. It is very interesting to note that housing stocks topped out in the summer of 2005 which was one full year before the housing market started getting into trouble. In that vein, housing stocks appear to be tracing out a a large, albeit sloppy, bottom, which could have bullish ramifications if they begin to rally from here. Several other important housing reports are slated to be released later this week.
Stocks Fall After Fed Meeting:
Around 2:15pm EST, the Federal Reserve announced the decision of their latest meeting. The Fed held rates steady near historic lows and left the option to add more economic stimulus, if needed. The Fed also said that inflation remains below levels that indicate a healthy economy and made it clear that they were ready to provide “additional accommodation” to support the ongoing recovery. Stocks traded higher after the announcement but sellers showed up in the final hour and sent stocks lower.
Market Action- Confirmed Rally:
On average, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong. Looking forward, the window is open for disciplined investors to carefully buy high-ranked stocks. It was very encouraging to see the major averages and several leading stocks break above stubborn resistance levels and continue marching higher. All the major averages had recently rallied above their respective 200-day moving average (DMA) lines, a clear sign that the overall market is in healthier shape. Now that the summer highs have been exceeded, the next important resistance levels for the major averages are their respective April highs.