Wednesday, March 07, 2012
Stock Market Commentary:
Stocks bounced on Wednesday after ADP reported a healthy jobs number and buyers showed up to “buy the initial dip” in this 3 month rally. 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. However, the benchmark S&P 500 encountered resistance above its 2011 high (~1370) and is currently pulling back to consolidate its recent move. It would be perfectly normal and healthy to see a 5-9% pullback before a new leg higher begins. That would bring the S&P 500 down to 1310-1240. Until then, the bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line.
Economic Data Helps Stocks:
Before Wednesday’s open, ADP, the country’s largest private payrolls processor, said the economy added 216,000 new jobs last month which topped the Street’s estimate for 208,000. A separate report released by the Labor Department showed that unit labor costs rose at an annual rate of +2.8% in Q4 which topped the Street’s estimate for an unchanged reading. More encouraging, wages rose at an upwardly revised +3.9% rate in Q3 2011. On the political front, Super Tuesday did little to help solidify the Republican nominee. The market is now waiting to see what happens when the ECB and Bank of England meet on Thursday and then see how the jobs market fared last month when the much anticipated jobs report is announced before Friday’s open.
Market Outlook- Confirmed Rally
Risk assets (stocks, FX, and commodities) have finally began to pullback which is considered normal as long as this pullback is mild and stops at logical levels of support (i.e. prior chart highs, 50 DMA line, etc). However, if the selling intensifes and support is breached then the bears will have regained control of this market. 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!