Thursday, April 12, 2012
Stock Market Commentary:
Stocks and other risk assets continued bouncing back on Thursday helped by fresh hopes of QE3 and a flurry of U.S. economic 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. The fact that the Dow Jones Industrial Average, Small Cap Russell 2000, are below their respective 50 DMA lines suggests that this important moving average might become an area of resistance. It is encouraging to see the S&P 500 regain its 50 DMA line on Thursday.
Flurry of Economic Data Lifts Stocks:
Before Thursday’s open, weekly jobless claims rose by +13,000 to a seasonally adjusted 380,000, which missed estimates. It was the highest reading since January and bodes poorly for the jobs market, especially after March’s disappointing jobs report. Other economic news was mixed to more positive. The Labor department said its producer price index (PPI) was unchanged in March thanks in part to a decline in energy prices, which offset a rise in food prices. The unchanged reading missed the Street’s expectation for a gain of +0.3% and helped allay inflation woes. Finally, the Commerce Department said the trade deficit narrowed unexpectedly by 12.4% to $46.0 billion in February and exports gained to a record $181.2 billion. There are two important data points that are slated to be released after Thursday’s close, Google’s Q1 earnings report and China’s Q1 GDP. Friday will be another busy day for investors, earnings are slated to be released from JPM, and WFC, the consumer price index (CPI) will be released and the latest reading from consumer sentiment.
Market Outlook- In A Correction
From our point of view, Thursday marked Day 2 of a current rally attempt which means the earliest a proper FTD could emerge will be on Monday providing Wednesday’s lows are not breached. Remember, it is quite normal to see markets pullback to digest their latest move but from a risk/reward standpoint, being heavily long when the major averages are below their respective 50 DMA lines does not offer an optimal risk/reward level. However, once these major averages get back their respective 50 DMA lines, then one can easily return to the long side. 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!