Flurry of M&A News Lifts Stocks

Tuesday, August 17, 2010
Stock Market Commentary: The technical action in the major averages is not ideal. Currently, resistance for the Dow Jones Industrial Average is its 200 DMA line, while the Nasdaq composite faces resistance at its 50 DMA line. Meanwhile, the benchmark S&P 500 index managed to close above its 50 DMA line but still faces resistance near its 200 DMA line (1,116) and then its prior chart highs near 1,131. The action in leading stocks remains questionable at best which is another disconcerting sign. Tuesday’s action does not change our cautious outlook. Put simply, we can expect this sideways/choppy action to continue until the market breaks out above resistance or below support (recent chart lows). The first scenario will have bullish ramifications while the second will be clearly bearish. Trade accordingly.