Busy Week On Wall Street; Stocks Rally

Friday, September 3, 2010
Stock Market Commentary:

Stocks ended higher this week as investors digested a slew of economic data. Friday’s reported volume totals were about even on the NYSE and slightly higher on the Nasdaq exchange compared to Thursday’s levels. Advancers led decliners by over a 3-to-1 ratio on the NYSE and on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange. There were 71 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, nicely higher than the 47 issues that appeared on the prior session..

Monday -Tuesday’s Action- Stocks Edge Lower:

Stocks fell on Monday after the Commerce Department said disposable incomes, or the money left over after taxes, missed estimates while consumer spending rose +0.4%, matching estimates. Stocks ended mixed on Tuesday as investors digested a slew of economic data. Overnight, Asian stocks plunged, sending Japan’s Nikkei’s index to a 16-month low, which bodes poorly for other capital markets. Elsewhere, two stronger than expected economic reports: The S&P Case-Shiller Housing Index and the latest read on consumer confidence, helped lift stocks in the first half of the session.  However, stocks fell after a weaker than expected PMI report and the minutes of the latest Fed meeting were released. The minutes of the latest Fed meeting showed more infighting at the Fed which suggests the Fed may be “running out of bullets” to stimulate a slowing economy.

Wednesday-Friday’s Action- Market’s Follow-Through, New Rally Confirmed!

Stocks soared on Wednesday, produced a proper follow-through day (FTD), and confirmed their latest rally attempt (which began on Friday) after fear eased that the global economic recovery was in peril. Stocks surged around the world as the US dollar and treasuries plunged after manufacturing in the US and China grew faster than economists estimated. The stronger than expected manufacturing data from China and the US helped allay the woes of a global economic slowdown. 

Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. It was encouraging to see a flurry of high-ranked leaders trigger fresh technical buy signals and break out of sound bases. The next important level to watch for the major averages are their respective 200-day moving average (DMA) lines. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

Market Action- Confirmed Rally:

Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. It was encouraging to see a flurry of high-ranked leaders trigger fresh technical buy signals and break out of sound bases. The next important level to watch for the major averages are their respective 200-day moving average (DMA) lines. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.

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