Tuesday, February 14, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets opened higher on Monday after the Greek parliament approved the closely contested austerity measures for their second bailout. 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. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and now has its sights set on its 2011, high near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line.
Retail Sales Miss Estimates, Import and Export Prices Rise:
Before Tuesday’s open, investors digested the latest round of lackluster economic data. Retail sales grew by +0.4% last month which was half of the Street’s estimate for a gain of +0.8%. Excluding autos, retail sales rose by +0.7%, which topped the Street’s estimate for a gain of +0.5%. The Labor Department said import prices rose +0.3% while export prices rose +0.2% in January. Export prices matched estimates and topped December’s decline of -0.5%.
Market Outlook- New Rally Confirmed
Nearly all risk assets are extended by any normal measure and are due for a pullback to consolidate their recent gains. The key is to ascertain the “health” of the pullback to see if it is a short pause in a new uptrend or the beginning of a new downtrend. Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. 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!