Economic Data Tops Estimates; 200 DMA Line Is Resistance

Thursday, September 9, 2010
Stock Market Commentary:

Stocks gave back earlier gains but ended higher after latest round of economic data helped allay fears of a double dip recession. Thursday’s volume totals were mixed; higher on the NYSE and lower on the Nasdaq exchange. Advancers led decliners by a 5-to-3 ratio on the NYSE and by a 7-to-6 ratio on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange. There were 55 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, higher than the 54 issues that appeared on the prior session.

Economic Data Tops Estimates; 200 DMA Line Is Resistance:

Before Thursday’s open, the Labor Department said weekly jobless claims fell -27,000 to 451,000 last week which bodes well for the ailing jobs market. Elsewhere, the trade deficit narrowed more than forecast which bodes well for the global recovery. High ranked stocks fared well which is another sign that this nascent rally is strengthening. It is also encouraging to see very little distribution emerge since the major averages confirmed their latest rally attempt on the Wednesday, September 1, 2010 follow-through day (FTD). 

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 in recent sessions. 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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