Stocks Pullback To Consolidate Monday’s Move

Monday, August 3, 2010
Stock Market Commentary:

Stocks pulled back to consolidate Monday’s move as investors digested a series of lacklsuter economic and earnings data. Volume totals were reportedly mixed; higher on the Nasdaq exchange and lower on the NYSE which marked a distribution day for the Nasdaq composite. Decliners led advancers on the NYSE by a 23-to-15 ratio and by a 2-to-1 ratio on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE and the Nasdaq exchange.  There were 27 high-ranked companies from the Leaders List that made a new 52-week high and appeared on the BreakOuts Page, lower than the 57 issues that appeared on the prior session.

Tepid Economic Data Weighs On Stocks:

The market digested a slew of weaker than expected economic data ranging from the ailing housing market to the US consumer. The National Association of Realtors said pending home resales in the US unexpectedly fell -2.6% from the prior month.  Much of the decline was due to waning demand after the government tax credit expired. The report fell short of the Street’s estimates for a gain of +4%. Meanwhile, a separate report showed that factory orders slid -1.2% in June, which doubled the decline analysts’ expected. Finally, the Commerce Department said consumer spending was unchanged after a +0.1% gain in the prior month. The report also showed that US incomes did not increase for the first time since September 2009 while the savings rate jumped to the highest level in a year.

Market Action- Confirmed Rally:

At this point, the Dow Jones Industrial Average, S&P 500, and the NYSE Composite indexes have all traded above resistance at their long term 200-day moving average (DMA) lines and recent chart highs. The tech-heavy Nasdaq Composite and small-cap Russell 2000 index 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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