It has been 4 months since the major averages have been in this area. It took only a small stutter last Friday to absorb the reamaining resistance Friday and then zoom up today. The price action has been clearly bullish this past 2 weeks. Looking back at the daily chart we can see the market has now broken out of the lower band of it’s wide sideways pattern. Traders should not get overly enthusiastic at this point since there is still area to conquer before challenging the post crash highs, but it is now within our sights.
Don’t let the fact that the market is 9 consecutive days up, and starting a 4th consecutive week up in a big way be lost in any analysis. This is unusual, especially in this choppy envirnoment. Therefore don’t be surprised at a pullback before any assult is made on the highs. A couple of things will be taking place early this week that may afffect how the market will proceed near term.
First, the FOMC will be meeting today and announcing any additonal actions they may be considering towards getting the economy going at 2:15 PM ET. Interest rtates are widely expected to remain the same but traders are always on the lookout for different language in the statement trying to get a small gleen on what the Fed is thinking. Some advance rumors about buying more treasuries has been circulatiing which would potentially lower interest rates more and may be included in their announcement. The yield opened this week on the 10 year note at 2.73%.
Great care should be taken on trading ahead of the FOMC interest announcement due to volatility. More information can be found in the article ‘trading the news’.
Second, on the global scene Ireland will be auctioning $1.5bln Euros in bonds; and how well that is received may affect things. Ireland, if you recall, is one I’s in the noted PIIGS countries with excessive debt problems.
Probably not news to most by now is President Obama’s special town hall meeting CNBC held yesterday in which economy issues were in the forefront. The same morning the National Bureau of Economic Research, a private research organization which has the interesting job of measuring the economy to determine the beginning and ending of recessions, has offically determined that the recession that began in December 2007 ended in June 2009. Not that that is going to make anyone without a job any happier. After all, June 2009 was 15 months ago.
But some conclusions can be noted starting with the fact that it has been the longest recession since World War 2; and that another fall back in GDP for two quarters could ‘offically’ now be termed a double dip. Not that that should make any difference what adjectives are used to call it either. It’s a very long gut wrenching recession by any name.
Interestingly enough The NBER picked the June 2009 date on an examination of GDP, employment, and personal income.
Just because the recession ended 15 months ago doesn’t mean that the economy is healthy, the NBER asserted. “Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion,” the NBER wrote. John Maudlin, if you picked up his free newsletter from the link provided earlier, was indeed correct when he gave his view a couple years ago that this would be a ‘statistical’ recovery, and not feel like a normal one as it would be slower, longer, and a essentially a jobless one.
Todays advance was strong right from the get go. A small pullback around 11:30 AM ET which was tradeable occured, followed by another advance to new daily highs. Just what a trend trader wants to see. The tech and finance sectors were leading the charge again. As stated before this combination is good as they make up a big part of their respective indexes and in many repects also speak to the economy situation.This might be a good day to check in on the homebuilders as well since they were involved big time at the start of this whole recession.
Colorado stock MDC Holdings (MDC), rallied along with the others as Lennar (LEN), announced a 16c profit before the market opening. A profit was expected but only 4c. LEN was up 8.4% at the close; Colorado’s MDC was up 3.9%. XHB, the ETF for the homebuilders was up just over 3.3%.
Trade with a plan.