Monday, March 21, 2011
Stock Market Commentary:
On Monday, stocks surged around the world, after allied forced began operation Odyssey in Libya and the nuclear threat eased markedly in Japan. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. The current crisis in the Middle East remains in flux which is putting upward pressure on oil and gold and downward pressure on equities. The benchmark S&P 500 was up nearly 100% from its March 2009 low before its latest correction and is still about -19% off its all-time high from October 2007.
Nuclear Woes Ease In Japan, Libya Under Seige, and Existing Home Sales Fall:
Over the weekend, allied forces removed several of Qaddafi’s key military strong holds in Libya. This weakened the aging dictator and will hopefully lead to a peaceful resolution to the three week conflict, lead by the Libyan people. The nuclear threat eased markedly in Japan which helped allay woes that an all out nuclear meltdown will occur. These two events helped stocks rally across the globe. In the U.S., existing home sales plunged while the median home price fell to the lowest level since April 2002. The National Association of Realtors said existing home sales tanked -9.6% to a 4.88 million annual rate which is less than the 5.13 million median forecast and bodes poorly for the ailing housing market. The report also showed that the median price fell -5.2% from the same period last year and a whopping 39% were sales of distressed properties.
Market Action- Market In A Correction; 28-Week Rally Ends
All the major averages sliced below their respective 50 DMA lines on Thursday, March 10, 2011. Thursday, March 17, 2011 marked day 1 of a new rally attempt which means that the earliest a possible follow-through day (FTD) could emerge would be Tuesday, as long as Thursday’s lows are not breached. However, if Thursday’s lows are breached, then the day count will be reset and odds will favor lower prices, not higher, will follow. It is important to note that the recent ominous action reiterates the importance of raising cash and playing strong defense until a new FTD emerges. If you are looking for specific help navigating this market, please contact us for more information.