All Eyes On Europe

Tuesday, August 16, 2011
Stock Market Commentary:

Stocks opened lower as the world awaited the conclusion of the much anticipated meeting between France and Germany. In the U.S., the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s (8.16.11) lows hold- there is a strong chance that the markets may be forming a short-term low. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce.

EU Debt Woes Ease & Housing Starts Fall Less Than Expected:

The Commerce Department reported that housing starts slid -1.5% to a seasonally adjusted annual rate of 604,000 units. The report topped estimates for 600,000 but did little to help the ailing housing market since June’s reading was revised down to a 613,000, from 629,000. Lower revisions typically bode poorly for the underlying investment. The one ray of light was that housing starts rose +9.8% from the same period last year.  A separate report showed U.S. industrial output rising +0.9% last month, more double June’s +0.4% and the fastest gain in 7 months. In Europe, France and Germany ruled out a new Euro Bond which was designed to help alleviate Europe’s onerous debt burdens but agreed to several other factors aimed at restoring confidence in the troubled continent. The latest GDP data out of Europe missed estimates.

Market Outlook- Market In A Correction

The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.

 

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