Stocks Fall As Consumer Credit Contracts

Wednesday, April 7, 2010
Market Commentary:

The major averages ended lower, experiencing their largest single day decline since February, after consumer credit fell and concern about Greece defaulting accelerated. Volume totals on the NYSE and on the Nasdaq exchange were reported higher compared to Tuesday’s totals which marked the latest distribution day for the major averages in recent weeks. Breadth was negative as decliners led advancers by about a 2-to-1 ratio on the NYSE, and by a 4-to-3 ratio on the Nasdaq exchange. New 52-week highs trumped new lows on both exchanges yet again. There were 52 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 58 issues that appeared on the prior session.

Consumer Credit Contracts; Stocks Fall:

The Federal Reserve said consumer borrowing slid by a larger than expected reading of $11.5 billion in February. The fear that lower consumer spending may curtial economic growth played a pivotal role in sending stocks lower on Wednesday. In Europe, fear spread that Greece may default after rejecting the EU-IMF backed aid package. This sent the euro lower (greenback higher) for a third consecutive day which put pressure on dollar denominated assets- mainly stocks and commodities. 

Market Action- Confirmed Rally:

The benchmark S&P 500 Index currently has 5 distribution days while the Nasdaq Composite and Dow Jones Industrial Average have 4 since the March 1, 2010 follow-though-day (FTD). These distribution days have not been damaging, and normally it is considered healthy for the major averages to have less than 4 distribution days in a four week period. Therefore, the fact that we currently have 5 distribution days for the S&P 500 suggests a more cautious approach may be prudent. Trade accordingly.

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