Market Commentary for Wednesday, June 20, 2012

Much of the skepticism for a continuation of the rally in the U.S. stock market from the past weekend was put to rest in the first 2 days of trading of this week.  On Monday the market started out weak, but then quickly regained its footing by mid morning.  Even though the indices finished mixed on Monday with the DJIA actually closing in the red, the market leading stocks dominated the action with impressive price and volume action.

Tuesday the rest of the indices joined the rally with the DJIA adding 95.51 points to close at 12,837.33 and the S&P 500 jumping 34.43 (+1.19%) in heavier trade.  Moreover, the rally broadened with more leading stocks showing positive action.  The list of stocks on the move in heavier trade grew in Investor's Business Daily, a sign that institutional investors are stepping back into the market.

Still, there remains some worries whether the market has been moving in anticipation that the Fed will announce a new round of QE, and that if the Fed disappoints tomorrow when the FOMC minutes are released, that the market will fall apart.  While we certainly cannot rule that out, the action in leading stocks points to a broadening of the rally and a continued move higher.

That said, there are some market indicators now pointing to overbought levels where the market has previously stalled.  So a sideways pause or slight pullback to allow digestion of the recent gains certainly would be well within reason.  

It's important to remember NEVER to chase a stock higher as it almost always leads to a poor entry.  For those who missed the initial move, know that if the rally continues to broaden, more stocks will setup in proper bases and offer more opportunities.


A partial list of leading stocks to monitor; listed in no particular order:  ASPS, UNFI, QCOR, CYBX, ULTA, ATHN, EQIX, EBAY, SXCI, ACIW, ALXN, BBBY, LL, DNKN, UA, MLNX, CRUS, MGAM, CSTR, XPO, AAPL, ROST, BWLD, CERN, TJX, WWWW, PRAA, ALGN, VSI, ELLI, MCK

Click on chart to enlarge: