Stocks Rally On Day 5 Of A New Rally Attempt

Thursday, February 11, 2010
Market Commentary:

Stocks rallied on Thursday but the gains were too small to produce a sound follow-through day. Advancers led decliners by nearly a 3-to-1 ratio on both major exchanges. There were 13 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, up from the 6 issues that appeared on the prior session. New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

EU Agrees To Help Greece:

Stocks rallied after the European Union said it would help Greece recover from the worst economic crisis the continent has experienced since the euro was established 11-years ago. It is important to note that Portugal and Spain’s growing budget deficits have yet to be addressed which could come back and haunt the EU later this year.

Inflation Eases In China & US Jobless Claims Fall:

Inflation concerns eased in China after consumer prices rose less than expected in January. This helped allay fears that the Chinese central bank will continue taking aggressive steps to curb its robust economy. Domestically, the Labor Department said that weekly jobless claims unexpectedly droped last week. The weaker than expected report is a net positive for the ailing jobs market and bodes well for the economic recovery.

Market Action: In A Correction

Looking at the market, as long as last Friday’s lows are not breached, the window is now open for a new follow-through day (FTD) to emerge. A new follow-through day will be confirmed when one of the major averages rallies at least +1.7% on higher volume than the prior session as a new batch of leaders breakout of sound bases. However, if last Friday’s lows are breached then the day count will be reset and a steeper correction may unfold.

It is also important to see how the major averages react to their respective 50-day moving average (DMA) lines which were support and are now acting as resistance. Until they all close above that important level the technical damage remaining on the charts is a concern. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data which also remains a concern. Remember that the market remains in a correction until a new new follow-through day emerges. Until then, patience is king.

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