Tuesday, February 28, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets rallied after the latest Italian bond yields plunged. 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 jumped above its 2011 high and hit the highest level since 2008! The bulls remain in control as long as the benchmark S&P 500 trades above its 50 DMA line. Leadership continues to improve which is another healthy sign.
Italian Yields Fall, U.S. Economic Data Missed:
Stocks rallied on Tuesday after Italy sold a healthy amount of bonds at lower interest rates. U.S. economic data was mixed. It was discouraging to see that durable goods fell -4% in January 2012 which was the largest drop in three years. The S&P Case/Shiller index showed that home prices across much of the country fell -3.8% in Q4 2011 which brought home prices down to levels not seen since 2006. However, consumer confidence jumped to 70.8 from an upwardly revised 61.5 in the previous month. This easily topped the Street’s average estimate for a gain of 63.0. It is important to note that the consumer currently makes up 2/3 of the U.S. economy.
Market Outlook- Confirmed Rally
Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. At this point, all this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought so trade accordingly. 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!