Stocks Rally As Inflation Eases


Wednesday, March 17, 2010
Market Commentary:

Stocks rose, sending the Dow Industrial average and the benchmark S&P 500 index to a fresh 18 month high and the Nasdaq composite rose to a fresh 19 month high after the latest round of healthy economic data was released. Volume totals were mixed; higher on the Nasdaq and lower on the NYSE compared to the prior session. Advancers led decliners by nearly a 3-to-1 ratio on the NYSE and by a 8-to-5 ratio on the Nasdaq exchange. There were 77 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the CANSLIM.netBreakOuts Page, up from the 54 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges. The number of new highs on the NYSE jumped to  the highest level since 2005 which is a very healthy sign. 

Healthy Economic Data From Across The Globe:

Producer prices slid by a larger than expected -0.6% which eased inflation woes and eased pressure on the Federal Reserve to raise rates in the foreseeable future. Overseas, the Bank of Japan doubled its lending program aimed at increasing its credit growth to $222 billion. In Europe, investor confidence rose after the latest round of stronger than expected earnings were released. Stocks eased a bit after Ben Bernanke and Mr. Volcker testified on Capital Hill in the afternoon. 

Ideal Buying Window Remains Open:

It was encouraging to see a new batch of high ranked leaders break out of sound bases in recent weeks which reiterates the underlying health of this 3-week rally. Remember that the window remains open to begin buying stocks for the first 13-weeks after a sound follow-through day (FTD) is produced. Since the latest FTD occured on March 1, the ideal buying window remains open until the the middle of the summer, assuming this rally does not fail. 

Market Action- Confirmed Rally:

The fact that we have not seen any serious distribution days since the FTD bodes well for this nascent rally. It is also a welcome sign to see the market continue to improve as investors digest the latest round of stronger than expected economic and earnings data.Remember that now that a new rally has been confirmed, the window is open to start buying high quality breakouts. Trade accordingly.

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