Stocks Edge Higher Ahead of Fed Meeting

Monday, August 09, 2010
Market Commentary:

The major averages ended higher adding to their 6-week rally that was confirmed on the July 7, 2010 follow-through day. Volume totals were reported lower on the NYSE and on the Nasdaq exchanges versus the prior session. Advancers led decliners by almost a 3-to-1 ratio on the NYSE and by almost a 2-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 44 high-ranked companies from the Leaders List made a new 52-week high and appeared on the BreakOuts Page, higher from the 13 issues that appeared on the prior session.

Strong #’s Help Stocks Rally:

Stocks opened higher after McDonald’s Corp. (MCD +1.64%) topped sales estimates and gapped up to a fresh 52-week high. Ebay Inc. (EBAY +2.47%) also gapped up after its former unit Skype SA filed for an initial public offering for $100 million. Ebay bought Skype in 2005 and sold the company to a group of private investors led by Silver Lake for $2 billion in November 2009. EBay, retained a 30% stake in Skype which will make the company one of the largest shareholders in the new IPO. Elsewhere, several homebuilders caught a bid after a large Wall Street firm upgraded the group and said the housing market downturn is almost over. However, stocks encountered some pressure after news broke that the Fed might downgrade their outlook on the US economy when they meet on Tuesday.

Market Action- Confirmed Uptrend:

The Dow Jones Industrial Average and the NYSE Composite Index have traded above resistance at their long term 200-day moving average (DMA) lines and recent chart highs. The tech-heavy Nasdaq Composite, benchmark S&P 500, and small-cap Russell 2000 indexes still remain slightly below their recent chart highs. However, the fact that all of the major averages are trading above their respective 2-month downward trendlines bodes well for this five week rally. In order for a new leg higher to begin, all the major averages must close and remain above their respective resistance levels. Remember that the window remains open for for high-ranked stocks to be accumulated when they trigger fresh technical buy signals. Trade accordingly.

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