Wednesday, March 21, 2012
Stock Market Commentary:
Stocks and other risk assets were bid up late Tuesday after Bernanke said he would take additional steps if another shock hit the global economy. As we have been mentioning for weeks, the market is extended to the upside and we would not be surprised to see a nice pullback to shake out the weak/late hands. 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. The benchmark S&P 500 paused near its 2011 high (~1370) before moving higher. At this point, it would be perfectly normal and healthy to see a 5-9% pullback at any point to give the bulls a chance to consolidate the recent gain. That would bring the S&P 500 down to 1320-1280. It is important to note that the bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line.
Bernanke Testifies & Economic Data Mixed:
Futures were higher on Wednesday after Ben Bernanke said that he would take additional steps to stimulate the economy if conditions worsened. The Mortgage Bankers Association said weekly mortgage applications fell last week due to a drop in refinancing demand. The National Association of Realtors said home sales slid -0.9% in February to a seasonally adjusted annual rate of 4.59 million and revised January’s reading to 4.63 million. That was the highest level since May 2010. Equally important, housing stocks continue to act well.
Market Outlook- Confirmed Rally
Risk assets have begun pulling back which at this point is considered normal. The key going forward is to gauge the health of the pullback and see if the bulls are able to defend logical areas of support (recent chart lows and important moving averages). So far this action is considered healthy for the risk on trade. However, if sellers show up and support is breached then the bears will have regained control of this market (still a long ways off). 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!