Stocks End Mixed After Hitting Fresh 2010 Lows!

Tuesday, June 8, 2010
Market Commentary:

The major averages traded between positive and negative territory after Fed Chairman Ben Bernanke said he does not expect a double dip recession in the US. Volume, an important indicator of institutional sponsorship,  was higher than Monday’s levels. Advancers led decliners by a 23-to-15 ratio on the NYSE but trailed by an 11-to-16 ratio on the Nasdaq exchange. There were only 3 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, lower than the 4 issues that appeared on the prior session.  New 52-week lows outnumbered new 52-week highs on the NYSE and the Nasdaq exchange.

Major Averages Take Last Month’s Low:

The Dow Jones Industrial Average, Nasdaq composite, and small-cap Russell 2000 index all traded below their May 25, 2010 lows while the benchmark S&P 500 came within 2 points of last month’s low. So far, support has been tested and appears to have held but any further downside would suggest another leg lower may follow. The market reacted somewhat positively to Ben Bernanke’s comments that he does not believe a double dip recession will occur in the US but the price/volume action of the major averages in recent weeks disagrees with him.

All Eyes On The Euro:

Remember that it is extremely important to watch how the euro performs vs many of its popular counterparts. So far, the vast majority of the recent weakness has been directly due to European contagion woes. The euro negatively reversed (opened higher but closed lower) on Tuesday which put pressure on global equity indexes. Last month’s lows for the euro (formerly support) was just above $1.21 and that level has now become resistance. Going forward, the bears remain in control until the bulls manage to send the euro above $1.21. Elsewhere, it was disconcerting to see the euro plunge to a new multi year lows vs. the Swiss Franc.

Market Action- In A Correction:

From our vantage point, the latest three day rally failed, evidenced by the ominous action in the major averages since Friday’s jobs report was released. It is well known that a market should not be considered “healthy” unless it trades above its rising 200-day moving average (DMA) line. The fact that all the major averages are below both their 50 & 200 DMA lines bodes poorly for the near term. That said, the bears will likely remain in control until the popular averages close above their important moving averages and the euro catches a bid.

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