Stocks Negatively Reverse From Resistance


Thursday, July 29, 2010
Stock Market Commentary:

The major averages negatively reversed after encountering resistance near their prior chart highs. Volume, an important indicator of institutional sponsorship, was higher than Wednesday’s session which marked a distribution day for the NYSE and the Nasdaq exchange. Advancers led decliners by a 20-to-17 ratio on the NYSE and were about even on the Nasdaq exchange.  New 52-week highs outnumbered new 52-week lows on the NYSE and the Nasdaq exchange.  There were 21 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, higher than the 14 issues that appeared on the prior session.

Stocks End Lower As Deflation Fears Arise:

Several high profile technology stocks got smacked after Akamai Technologies Inc. (AKAM -12.90%), Nvidia (NVDA -9.87%), and Symantec Corp. (SYMC -11.18%) released weak Q2 results. Financial shares fell after New York Attorney General Andrew Cuomo began a fraud probe into the life insurance industry and subpoenaed several well-known firms.

Elsewhere, the Labor Department said jobless claims fell last week and confidence improved about Europe’s economy. Stocks turned tail after James Bullard, President of the Federal Reserve Bank of St. Louis, said the central bank should resume purchases of Treasury securities if the economy slows and deflation sets in. On Friday, the US government is slated to release Q2 GDP figures which will give investors the latest read on the economy.

Market Action- Confirmed Rally:

The major averages are still above their respective 2-month downward trendlines which is a healthy sign. However the Nasdaq Composite, NYSE Composite, and the benchmark S&P 500 index all closed below their respective 200-day moving average (DMA) lines which is not ideal. In order for a new leg higher to begin, the major averages will have to regain their longer term averages and close above their recent chart highs which currently serves as the next level of resistance. That said, the window remains open for for high-ranked stocks to be accumulated when they trigger fresh technical buy signals. Trade accordingly.

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