Week In Review: Stocks Advance As Investors Digest A Slew of Political, Economic & Earnings Data

Friday, March 26, 2010
Market Commentary:

For the week, the major averages ended higher as investors digested a slew of political, economic, and earnings data. The volume totals on the NYSE and on the Nasdaq exchange were reported lower compared to Thursday’s totals which was an encouraging sign. Advancers led decliners by a 10-to-9 ratio on the NYSE and were about even on the Nasdaq exchange. There were 17 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 58 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

Monday & Tuesday’s Action:

On Monday, the major averages ended higher as the dollar fell after Congress passed the historic health care bill. Stocks continued rallying on Tuesday after stronger-than-expected data was released from the ailing housing market. All the major averages rallied to new recovery highs after the National Association of Realtors said existing US home sales slowed to 0.6% last month which topped estimates. February’s reading was also higher from January’s -7.2% decline.

Wednesday- Friday’s Action:

On Wednesday, the major averages, US Treasuries, the euro and a slew of commodities pulled back as the US dollar advanced after Portugal’s debt was downgraded by Fitch. Economic data was mixed: durable goods were up while new home sales fell. Durable goods topped estimates and rose for a third consecutive month which was a healthy sign for the economic recovery. Meanwhile, new home sales fell -2.2% to a 308,000 annual rate. Overseas, Europe received some healthy economic data: European services and manufacturing grew at the fastest pace since August 2007 and German business confidence rose.

Stocks erased earlier gains and closed near their lows on Thursday after the Labor Department said initial jobless claims fell to the lowest level in six weeks and Fed Chief, Ben Bernanke, testified on Capital Hill. On Friday, stocks ended mixed after tensions escalated between North and South Korea. Before Friday’s open, the Commerce Department revised Q4 GDP to +5.6%, down from +5.9%. In addition, the average company in the S&P 500 earned a profit in Q4 2009 which snapped a 9-month losing streak and was the first quarterly profit since the second quarter of 2007. It will be interesting to see if that healthy news continues in the first quarter of 2010.

Market Action- Confirmed Rally:

The fact that there has only been two distribution days since the follow-though-day (FTD) bodes well for this nascent rally. It is also a welcome sign to see the market continue to improve as investors digest the latest round of stronger than expected economic and earnings data. Remember that now that a new rally has been confirmed, the window is open to proactively be buying high quality breakouts meeting the investment system guidelines. Trade accordingly.

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