Quiet Day On Wall Street

Tuesday, October 26, 2010
Stock Market Commentary:

Stocks opened lower then rallied back into positive territory as the US dollar rallied, the S&P Case-Shiller index disappointed investors, and consumer confidence topped estimates. Volume patterns remain healthy as the major averages have now begun the 9th week of their ongoing rally. However, it is important to note that there have been an ominous number of distribution days that have emerged in the popular indexes in recent sessions which suggests caution. On average, market internals remain healthy evidenced by an upward sloping Advance/Decline line and the fact that new 52-week highs continue to easily outnumber new 52-week lows on both exchanges

Economic Data Mixed:

Stocks opened lower as the USD rallied. However, share prices quickly recovered after the Conference Board’s confidence index rose to 50.2 from a revised 48.6 in September. This helped investors look past a sour report from the ailing housing market. The S&P/Case-Shiller index of home prices rose +1.7% from August 2009 but was the smallest year over year gain since February. The report showed that home prices in 20 major U.S. cities rose at a slower pace than forecast in August. Housing stocks continue to go nowhere and we would be remiss not to note that the residential building group is currently the second worst performing industry group in the market.

Market Action- Confirmed Rally, Week 9:

Heretofore, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong but the market action has been wide-and-loose which is not a healthy sign. The S&P 500 sliced below its two month upward trendline (shown above) which is not ideal. The next level of support for the major averages is their September highs, then their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. We have enjoyed large gains since the September 1st FTD and for the first time, the tape is getting sloppy.  Trade accordingly.

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