Rumor Of EU Bond & U.S. Economic Data Flat

Wednesday, September 14, 2011
Stock Market Commentary:

Stocks opened higher on Wednesday after word spread that a new EU bond would be offered. The major averages continued trading between support and resistance of their current base but most European markets, fell to fresh 2011 lows (which bodes poorly for US stocks). At this point, the current rally is under pressure evidenced by several distribution days (heavy volume declines) since the latest FTD. It is important to note that even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

New EU Bond & U.S. Economic Data:

Before Wednesday’s open, European markets edged higher after European Commission President Jose Manuel Barroso said the commission will present options regarding the introduction of new euro bonds. The heads of Greece, France, and Germany spoke today which helped allay concerns regarding a possible Greek default. Italy’s Parliament approved the confidence vote to approve the $54 billion austerity package.

In the U.S., the Commerce Department said retail sales were virtually unchanged in August which fell short of the +0.3% expected by the Street. Total retail sales reached 389.5 billion last month which was very close to the same number as July. Separately, the Labor Department said the producer price index (PPI) was flat last month, after a +0.2% gain in July.

Market Outlook- Rally Under Pressure:

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when several distribution days emerge or August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

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