Thursday, March 08, 2012
Stock Market Commentary:
Stocks opened higher on Thursday after the ECB and BOE held rates steady and investors were waiting for a deal on the latest Greek debt restructuring. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. Since then, stocks have been enjoying a very strong uptrend. However, the benchmark S&P 500 encountered resistance above its 2011 high (~1370) and is currently pulling back to consolidate its recent move. It would be perfectly normal and healthy to see a 5-9% pullback before a new leg higher begins. That would bring the S&P 500 down to 1310-1240. Until then, the bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line.
ECB, BOE, Brazil’s Central Bank Cuts Rates & Greek Deal:
Before Thursday’s open, the European Central Bank (ECB) and Bank of England (BOE) held rates steady and largely reiterated their recent, and cautious, stance regarding the ongoing economic recovery. Elsewhere the vast majority of Greece’s private debt holders agreed to the latest deal to restructure the country’s debt. Meanwhile, Brazil’s central bank slashed rates by 75 basis points to 9.75%, down from 10.50% to help stimulate their slowing economy. Investors were concerned after Brazil said that its economy grew by only +2.7% in 2011 which was way lower than 2010’s +7.5% rate.
In the U.S., jobless claims unexpectedly rose by 8,000 to 362,000 last week. A separate report released by Challenger, Gray & Christmas said that the number of job cuts fell by -3.3% in February which bodes well for the jobs market and the ongoing economic recovery. The Street expects Friday’s jobs report to show that U.S. employers added 210,000 new jobs last month.
Market Outlook- Confirmed Rally
Risk assets (stocks, FX, and commodities) have finally began to pullback which is considered normal as long as this pullback is mild and stops at logical levels of support (i.e. prior chart highs, 50 DMA line, etc). However, if the selling intensifes and support is breached then the bears will have regained control of this market. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!