Strong Week On Wall Street!

Thursday, April 21, 2011
Stock Market Commentary:

Stocks rallied on the shortened holiday week helping the Dow Jones Industrial Average hit a fresh 2011 high! The market is back in a confirmed uptrend after all the major averages jumped back above their respective 50 DMA lines. The healthy action was in response to a series of stronger than expected Q1 results and a host of solid economic data. Now that the market is back in a confirmed rally, odds favor higher, not lower prices lie ahead.

Monday & Tuesday’s Action: U.S. Credit Rating Cut To Negative; Stocks Rally on Strong Earnings & Economic News

Before Monday’s open, the S&P rating service cut the U.S. long term credit outlook to negative which tends to serve as a warning shot before an official downgrade.  S&P put a “negative” outlook on the U.S. AAA credit rating, and said surging budget deficits and massive government debt were the primary culprits. This sent a slew of so-called “risk” assets lower as traders are fearful that the robust 8-month rally that began in late August may be in jeopardy. The initial reaction was intense as it sent all the major averages diving below their respective 50 DMA lines. However, by the end of they day, buyers showed up and erased much of the losses.

Stocks edged higher on Tuesday as they recovered from Monday’s shellacking. Before Tuesday’s open, investment powerhouse, Goldman Sachs (GS) reported Q1 results which topped the Street’s estimates. However, earnings were down -22% from the same period in 2010 while sales slumped by -5%. The stock opened higher higher but quickly reversed and traded lower as it continues falling further and further below its 50 & 200 day moving average lines. In addition, according to IBD, Goldman’s EPS rating has plunged to 13 (99 is the highest possible rating) while its relative strength rating has tanked to only 22 (99 is the highest possible rating) which indicates weakness, not strength.

Wednesday & Thursday’s Action: Stock Surge on Heavy Volume!

Several high profile companies released stronger than expected Q1 results between Tuesday’s close and Wednesday’s open. International Business Machines Corp. (IBM), Intel Inc. (INTC), AT&T (T), Wells Fargo (WFC), and Yahoo! Inc. (YHOO), were among some of the companies which released solid Q1 results and set the stage for Wednesday’s strong rally.  It was very encouraging to see all the major averages confirm their latest rally attempt and jump back above their respective 50 DMA lines on heavy volume. After Wednesday’s close, a slew of high-profile companies released Q1 results. Some well-known names were tech giants Qualcomm (QCOM) & Apple (AAPL), F5 Networks (FFIV), American Express (AXP), Chipotle Mexican Grill (CMG), and Amgen Inc. (AMGN). In other news, Sweden and Thailand’s central banks raised rates which sent the greenback tumbling as the U.S. Fed shows no signs of raising rates in the foreseeable future. Existing home sales rose last month which was the latest piece of stronger-than-expected data from the ailing housing market.

Stocks rallied on Thursday even though Jobless claims missed estimates. Jobless claims fell by -13,000 last week to 403,000 which was just above the 400k mark. Meanwhile, the four-week average rose +5,500 to 395,750 which was the highest reading since the middle of March.  The stock market will be closed on Friday in observance of Passover and Easter.

Market Action- Market In A Confirmed Rally

From our point of view, the market is back in “rally-mode” as all the major averages continue to trade above their respective 50 DMA lines and are flirting with, or at, fresh 2011 highs! In addition, leading stocks have held up very well even as the major averages slid below their respective 50 DMA lines in mid-April. If you are looking for specific help navigating this market, please contact us for more information.

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