Monday, January, 3, 2011
Stock Market Commentary:
The major US averages rallied smartly on Monday and hit new recovery highs after spending a few weeks in a tight trading range. Heretofore, market internals remain healthy evidenced by broad leadership, favorable volume patterns, a rising advance/decline line, and a healthy number of new highs on both major exchanges.
ISM Mfg Data is Strong:
Stocks roared on Monday after the ISM Manufacturing index rose in December and jumped to the fastest pace in 7-months. The ISM’s mfg index rose to 57 last month from 56.6 in November. It is important to note that readings over 50 indicate expansion while readings below 50 indicate contraction. Elsewhere, it was also encouraging to see inflation in China ease which helped allay pressure on China to curb their red-hot economy. It was also healthy to see a slew of high ranked leaders rally after shallow pullbacks towards support (i.e. important moving averages).
Market Action- Market In Confirmed Rally Week 19
It is encouraging to see the bulls show up in November and defend the 50 DMA lines for the major averages. The market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. Put simply, stocks are strong. Trade accordingly. If you are looking for specific high ranked ideas, please contact us for more information.