Stocks Flirt With Resistance

Monday, June 14, 2010
Market Commentary:

Stocks ended mixed but near their intraday lows after Greece’s Debt was downgraded by Moody’s. Volume totals were mixed compared to Friday’s levels; higher on the Nasdaq and lower on the NYSE. Advancers led decliners by nearly a 2-to-1 ratio on the NYSE and by a 5-to-4 ratio on the Nasdaq exchange. There were 31 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, higher than the 19 issues that appeared on the prior session.  New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

200 DMA Line Is Resistance:

The MSCI World Index rose for a fifth consecutive day which was its the longest winning streak since October 2009 as the US dollar continued its 5-day slide against the euro. This should not surprise any of our readers because we have written for months about the inverse relationship between the dollar and dollar denominated assets (mainly stocks and commodities). That said, the euro edged higher after European industrial production rose which suggests the global economy continues to rebound. The euro and US equities pulled back after Moody’s cut Greece’s credit rating and ended near the intraday lows.

Market Action- In A Correction:

The market is currently rangebound with resistance in the the benchmark S&P 500 index near the 200 DMA line and support near 1040. One would be wise to expect to the sideways rangebound action to continue until either support or resistance is breached. The S&P 500 marked Day 14 of its current rally attempt while the the Dow Jones Industrial Average completed Day 5 and the Nasdaq Composite marked Day 3. At this point, the window is now open for any of the major averages to produce a sound follow-through day (FTD) (until the recent lows are breached). Furthermore, 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. Trade accordingly.

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