Wednesday, February 01, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets enjoyed solid gains on the first trading day in February. 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 high 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.
Stocks Rally On Strong Econ News:
On Wednesday, stocks and a slew of other risk assets rallied which was a strong start to the new month. Overseas, both China and Germany (two very important economies in the global puzzle) said their manufacturing sectors grew which bodes well for the global recovery. In the U.S., the ADP, the country’s largest payrolls company, said U.S. employers added 170,000 new private jobs last month which was slightly short of the Street’s estimate. Elsewhere, the ISM said its factory index (which measures the U.S. manufacturing sector) rose to 54.1 last month which was the highest level since June but slightly missed the Street’s estimate of 54.4. However, it was above the boom/bust level of 50 which signals expansion. Finally, the Commerce Department said construction spending rose +1.5% in December which was its fifth consecutive monthly gain.
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!