Stocks End Week Relatively Flat

Friday, June 24, 2011
Stock Market Commentary:

Stocks ended relatively flat to slightly higher as investors digested a very busy week of data. After the dust setteled, the major averages were little changed but remain trapped in the middle of their multi-week sideways trading range with support near the 200DMA and resistance near the recent chart lows (SPX 1294) and then the 50DMA line.

Monday-Wednesday’s Action: Greece and Fed Dominate The Headlines

On Monday, stocks and a slew of commodities ended mixed as investors waited for the next step in the ongoing situation in Greece to unfold. On Tuesday, stocks soared as investors were waiting for a positive confidence vote from Greece and the conclusion of the Fed’s latest meeting. Existing home sales fell -3.8% to a 4.81 million annual rate in May. After Tuesday’s close, the Greek Prime Minister won the much anticipated confidence vote which helped ease tensions in the region. Stocks were smacked on Wednesday effectively ending their latest (short-lived) rally attempt when the Federal Reserve held rates steady but lowered their growth targets for 2011 and 2012.

Thursday & Friday’s Action: Sloppy Action; Support Holds!

Before Thursday open, the Labor Department said weekly jobless claims rose +9,000 t0 429,000 last week which still above the dreaded 400,000 level. Elsewhere, new home sales slid -2.1% in May to 319,000, which topped the Street’s 305,000 estimate. In a healthy data point for the ailing housing market, the number of new homes on the market fell -6,000 to 166,000 which was the lowest level in 50 years. In  a surprise move to lower energy prices, the International Energy Agency (IEA) said 60 million barrels of oil would be released from strategic government stockpiles across the globe. The underlying logic behind the move was that lower oil prices may help stimulate the global economy. Only time will tell. Before Friday’s open, two important stronger than expected economic data points were released. GDP rose +1.9%, topping the Street’s estimate of +1.8%. A separate report showed that durable goods orders rose +1.9%, topping the Street’s +1.5% forecast and also topped April’s reading of -2.7%.

Market Outlook- Market In A Correction:

The market is back in a correction after another failed follow-through day on Tuesday, June 21, 2011. Now that we are back in a correction, defense remains the best offense. The next level of support for the major averages is their respective 200 DMA lines and then their March lows. The next level of resistance for the major averages is their respective 50 DMA lines. Trade accordingly.

For those of you that are interested, the S&P 500 hit a new 2011 high on May 2, 2011. Two days later, on Wednesday, May 4, 2011, we turned cautious and said “The Rally Was Under Pressure” (read here). Then on Monday, 5.23.11, we changed our outlook to “Market In A Correction” (read here). On Monday, June 6, 2011 we pointed out that the S&P 500 violated its 9-month upward trendline (read here) and reiterated our cautious stance. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. Two days later, on Thursday, June 23, 2011, our outlook changed to “Market In A Correction” after the market sold off hard on renewed economic woes. If you are looking for specific help navigating this market, please contact us for more information.

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