Wednesday, January 25, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets rallied after President Obama’s State of the Union Address Tuesday night, a slew of corporate earnings were announced, and the results of the latest Fed meeting. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 is doing its best to stay above its Q4 2011’s high (~1292) and now has its sights set on its 2011 highs near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line.
State of the Union, Fed Meeting, & A Slew of Earnings & Economic Data:
On Wednesday, stocks rallied as investors digested a slew of economic and earnings data. President Obama’s State of the Union address did little to move markets as he largely reiterated his recent stance on a slew of domestic and foreign issues. One of the highlights was that Obama proposed large changes to the convoluted tax code. He proposed a minimum 30% effective rate on millionaires to eliminate inequalities in the tax current tax structure that favor wealthier citizens. In other news, pending home sales missed estimates which was not ideal. Weekly mortgage applications edged lower which is not ideal for the ailing housing market. The Federal Reserve held rates steady and said they will likely hold rates near zero until 2014 as the economy continues to recover. Many stocks that released earnings were mixed this week.
WEDNESDAY: Weekly mortgage apps, FHFA house price index, pending home sales, oil inventories, FOMC meeting announcement, Bernanke press conference; Earnings from Boeing, ConocoPhillips, United Tech, Delta, Motorola Solutions, Amgen, Netflix, SanDisk, Symantec
THURSDAY: Durable goods orders, jobless claims, new home sales, leading indicators, 7-yr note auction; Earnings from AT&T, Caterpillar, 3M, Nokia, AutoNation, Bristol-Myers, Time Warner Cable, Motorola Mobility, Starbucks
FRIDAY: GDP, consumer sentiment; Earnings from Chevron, P&G, DRHorton
Market Outlook- New Rally Confirmed
Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. 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!