Summer Highs Are Breached, Next Stop; April’s Highs


Monday, September 20, 2010
Stock Market Commentary:

Stocks rallied around the world and extended their three week rally after positive data was released from the ailing housing sector and the latest multi-billion dollar merger was announced. As expected, volume was reported lower on the NYSE and on the Nasdaq exchange compared to Friday’s heavy options inflated levels. Advancers trumped decliners by over a 4-to-1 ratio on the NYSE and by nearly a 4-to-1 ratio on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange. There were 101 high-ranked companies from the Leaders List made a new 52-week high and appeared on the BreakOuts Page, nicely higher than the 59 issues that appeared on the prior session.

Latest M&A News, Housing Sentiment Is Weak But Lennar Earnings Offset Housing Woes:

Stocks opened higher after Lennar Corp.(LEN +8.22%) reported solid earnings that topped estimates and International Business Machines Corp (IBM +1.23%) announced a $1.7 billion takeover. Lennar’s stronger than expected earnings helped allay concerns that the ailing housing market is deteriorating. The stronger earnings helped offset a weaker than expected report from the National Association of Home Builders that showed home builders’ confidence remained unchanged at 13. September’s reading  matched an 18-year low.

Market Action- Confirmed Rally:

The action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong. Looking forward, the window is open for disciplined investors to carefully buy high-ranked stocks, while many pundits are expecting that markets may consolidate following recent gains. It is very encouraging to see the major averages and several leading stocks break above stubborn resistance levels and continue marching higher. All the major averages rallied and managed to stay above their respective 200-day moving average (DMA) lines last week, which is another encouraging sign. Now that the summer highs are breached, the next important resistance level for the major averages are their respective April highs.

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