MV Weather Report: GDP Chases Clouds Away
Rain or shine, we review the day's biggest stock stories.
The recession is over... or so says today's GDP data.
For the third quarter, Gross Domestic Product rose by 3.5%, better than the analyst forecasted 3.2%. This was the first time the economy expanded in over four quarters, snapping the worst recession since the Great Depression. Today's positive GDP report was credited to the massive government stimulus that's been injected into the economy (think cash for clunkers).
The market loved the news as the S&P 500 snapped a four day losing streak, closing higher by 2.23% to 1065. The positive data also led to a rally in Crude Oil and Gold and a selloff in the dollar.
It was an across the board rally as strength was seen in names like Apple (AAPL), Freeport McMoran (FCX), JPMorgan (JPM), Goldman Sachs (GS), and Whirlpool (WHR) to name a few.
Just the other day, the bears were getting loud and it looked like a deep sell off was underway. Does today's GDP number change that? Professor Smita Sadana told Buzz readers what she is looking at.
At times like this, the questions on every one's mind are:
1. What if the correction is over?
2. Now that I didn't get in on the long side, where can I short?
So far, this eagerness to trip over each other in order to get long is expected, as I postulated in my note this morning. Dow-Industrials are technically looking the best having climbed over the 20-day moving average and SP-500 is closely following. That too is not unexpected, since these averages held up the best, technically, in the recent slide.
But, as they say, do not see where you fell but where you slipped… The sectors that flashed warning signals last week were Housing, Semis, Transports and Banks; and while those are finding some relief from their recent painful action, they still seem vulnerable. Let's take Dow Transports into consideration.
Is it possible that the market can go to new highs? Well, the market doesn't have to adhere to any rules or analysis and as I shared earlier the quality of the intervening rallies will be an important tell. But given the recent technical damage, in the short term, the market is back to being guilty until proven innocent. And if something changes, we'll hopefully be able to see it on our radars.
Click to enlarge
Big picture, we've been talking about the recession being over for months now, so I don't think today's GDP really changed anything. It seemed more like an excuse for an oversold market to bounce. That being said, technically today's bounce was positive as the 50 DMA held again.
Is it really that easy, just buy when the S&P hits the 50 DMA?
Have a great night!
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