50 DMA Line Is Under Attack!

Tuesday, April 12, 2011
Stock Market Commentary:

Stocks fell after Alcoa Inc. (AA) reported slightly disappointing Q1 results. From our vantage point, the current rally is under pressure as all the major averages are falling hard towards their respective 50 DMA lines (Nasdaq Composite & NDX already violated their 50 DMA lines). The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. However, the correction was short lived when a new rally was confirmed on Thursday March 24, 2011′s healthy action. Since then, the action remains healthy which suggests the bulls are back in control of this market.

Stocks & Commodities Fall As Earnings Season Begins:

Crude oil plunged over -3% for the second straight day as a host of other commodities also fell in heavy trade. So far, crude oil  is down nearly $10 from its post recovery high, slightly above $113/barrel hit earlier this month. On another front, earnings season officially began and investors appear to be “buying the rumor and selling the news.” Stocks rallied over the past few weeks (buy the rumor) in anticaption of Q1 earnings and now that we are here, equities are under modest pressure (sell the news).

Market Action- Rally Under Pressure

The current rally which began with the Thursday, March 24, 2011 FTD is now under pressure as the Nasdaq composite & Nasdaq 100 both closed below their respective 50 DMA lines. Remaining objective, it is bullish to see the other popular averages all trading near to slightly above their respective 50 DMA lines. However, if that important level is breached, then lower, not higher prices, likely lie ahead. If you are looking for specific help navigating this market, please contact us for more information.


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