Wednesday, April 18, 2012
Stock Market Commentary:
Stocks and other risk assets were mostly lower on Wednesday as investors digested Tuesday’s strong move and the latest round of mixed earnings data. As earnings continue to be released in droves, it is paramount that we not only pay attention to the actual numbers but how the stocks (and major averages) react to the numbers. This allows us to see how the market participants are “voting” and helps us filter out the noise and focus on what matters most: price action. The Nasdaq composite, Dow Jones Industrial Average, and the benchmark S&P 500 index are all back above their respective 50 DMA lines which bodes well for the bulls. The small-cap Russell 2000 index is still below that closely followed level.
Spanish Debt Woes and Earnings Hurt Stocks:
Stocks fell on Wednesday as fresh concerns spread about Spain’s onerous debt levels. In other European news, minutes from the Bank of England showed that only one Monetary Policy Committee member still supported quantitative easing which squashed hopes of anther round of QE. ECB policymaker Jens Weidmann told Reuters that Spain should take care of its own debt woes and ruled out a third long-term financing operation (LTRO) from the ECB. In a surprise OP-ED, Portugal’s prime minister wrote in the Financial Times that the country may not return to capital markets for funds in 2013, as previously expected. Earnings disappointments from IBM and Intel (INTC) also weighed on stocks.
Market Outlook- In A Correction
From our point of view, the market is getting stronger now that several of the major averages are fighting to get back above their respective 50 DMA lines. Looking forward, that level should now become support. Therefore, probing the long side with close protective stops (below the 50 DMA line) might be prudent if you are looking for a low risk entry point. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!