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Monday Morning Outlook: Despite Technical Feats, Bulls Remain at the Mercy of Europe

Monday Morning Outlook: Despite Technical Feats, Bulls Remain at the Mercy of Europe
All eyes will be on the euro zone as EU leaders convene over the region’s fiscal future
by Todd Salamone 10/22/2011 10:28 AM

U.S. stocks extended their upward momentum last week, as investors clung to hope that a resolution to the euro-zone debt crisis is just around the corner. Furthermore, a relatively well-received round of big-cap earnings reports — with Apple (AAPL) the notable exception — also added fuel to the bulls’ fire. However, as Todd Salamone notes, while the Dow Jones Industrial Average (DJIA) and S&P 500 Index (SPX) conquered significant technical hurdles, closely watched developments out of Europe will likely set the tone for the week — and possibly even the rest of the year, as far as hedge fund managers are concerned. Meanwhile, Rocky White examines the historical significance of the Dow’s recent price action, and what it could signal for the bulls. Finally, we wrap up with a preview of the notable economic and earnings events of the week ahead, as well as a few sectors we’re watching now.

Notes from the Trading Desk: The Good News — and Potential Risks — for the Bulls
By Todd Salamone, Senior VP of Research

“The 80-day [moving average] is at 1,223, the 80-week is at 1,211, and the 80-month is at 1,225. All three trendlines have proven their significance in the past, and probably won’t go down without a fight. Should the SPX manage a breakout above these pivotal levels, it would be a big boost for the bulls.”
– Monday Morning Outlook, October 15, 2011

“Hedge funds hold just 45% of their assets in stocks, after subtracting their short positions from shares they own, Sarah Morgan reports at SmartMoney.com. That’s well below their typical exposure and approaches levels not seen since March 2009.”
– Barron’s, October 14, 2011

“According to Catalpa Capital Advisors, since 1928, the stock market was down for the year in October 37 times. In 29 of those instances, they staged fourth-quarter recovery rallies.”
– Barron’s, October 19, 2011

http://www.schaeffersresearch.com/commentary/content/monday+morning+outlook+despite+technical+feats+bulls+remain+at+the+mercy+of+europe/
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