Daily Market Commentary

Week-In-Review: A Tight Bullish Pattern Is Forming On Wall Street

17 Mar

A Tight Bullish Pattern Is Forming On Wall Street

Stocks rallied last week after nearly every major Central Bank in the world continued to err on the side of caution. The big news came from the U.S. Fed when it raised rates by a quarter point for the second time in three months. For the first time since the 2008 financial crisis, the it appears that the Fed is back in the Driver’s Seat. Stocks rallied nicely after the Fed raised rates and that hasn’t happened since before the 2008 financial crisis. Confidence, a huge part of the investing equation, is slowly being restored in global central banks and the global economy. So, stepping back, monetary policy remains accommodative for investors and so does fiscal policy. When Trump won the historical election back in November 2016, stocks soared because so-called animal spirits were released. The famous economist John Maynard Keynes referred to animal spirits as spontaneous optimism. That said, as long as stocks continue to rally we could be (not there just yet) entering into a climax run. The two biggest climax runs happened in 1929 and 1999 and tend to occur in the latter stages of a bull market. This bull market just turned 8 and is the second longest bull market in history and at some point it will end. That doesn’t mean we can’t shoot higher for here and rally for a few more years but that we want to stay grounded and keep everything in perspective. 

Mon-Wed Action:

Stocks were quiet on Monday as investors waited for a busy week of market moving data. The benchmark S&P 500 traded in its tightest range of 2017. The big news of the day came from Bill Ackman. The billionaire investor sold his stake in Valeant Pharmaceuticals and the stock plunged -13% to $10.56 heavy volume. Stocks slid on Tuesday after crude oil fell 2% to hit a fresh three-month low. Oil fell after OPEC said oil inventories had continued to rise even though the cartel decided to cut production. Separately, Saudi Arabia surprised the Street when it self-reported a jump in production, despite the global deal to cut supply. The big news of the week came on Wednesday when the U.S. Federal Reserve raised rates by a quarter point and, for the first time in years, appeared to be operating from a position of strength, not weakness. The other big event came from the Dutch elections. The election did not take a populist turn which could have caused the country to leave the E.U.

Thur & Fri Action:

Stocks closed mixed to slightly lower on Thursday as investors digested a busy week of data. Overnight, The Bank of Japan held monetary policy steady and maintained a positive view on the economy. The BOJ said it did not expect to expand monetary stimulus in the near future. Separately, The Bank of England did not raise rates as Brexit approaches. In the U.S. housing starts came in at 1.288 million, beating estimates for 1.270 million. Stocks were relatively quiet on Friday as investors digested a busy week and looked ahead to the G-20 meeting. 

Market Outlook: Strong Action Continues

The market remains strong as the major indices continue to hit fresh record highs. The bulls have a very strong fundamental backdrop of monetary and now fiscal policy. All the major central banks are still relatively “dovish” which is bullish for stocks. The U.S. Fed only raised rates by a quarter point to 0.75%, which, historically, is still very low. On the fiscal side, Trump’s pro-growth policies are received well. As always, keep your losses small and never argue with the tape. Want Adam To Be Your Personal Portfolio Consultant? You Don’t Have To Feel Alone In The Market, There Is A Better Way: Learn More

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16 Jun
Daily Market Commentary

Week-In-Review: Stocks End Week Mixed; Tech Stocks Fall – Again

Stocks End Week Mixed; Tech Stocks Fall – Again

Once again, we are entering a very split tape as investors sold leaders (tech stocks) and bought laggards for the second straight week. The Nasdaq and Nasdaq 100, which were leading the market for all of 2017, fell last week as the Dow Jones Industrial Average hit a fresh record high. So far, this still remains a relatively shallow pullback. In the short term, the 50 DMA line is the next level of support to watch for the popular averages. In early June, the Nasdaq was up close to 18% year-to-date which is much stronger than the ~8% year-to-date gains the S&P 500 and Dow Jones Industrial average enjoyed this year. After a big run, it is perfectly normal to see the Nasdaq pullback to digest that move. The worrisome part is that it is pulling back on heavy volume which is not ideal. After the 50 DMA line, the next important levels of support to watch are: Russel 2000: 1351, then 1335, then 1308. The Dow Industrials: 20.6K, then 20.4k, S&P 500: 2352, then 2322.25, Nasdaq Composite: 5995, then 5805, then 5769.39. Until those levels are breached on a closing basis, the bulls remain in control on a short, intermediate, and long term time-frame. Keep in mind, if the selling gets worse, a defensive stance is warranted.

Mon-Wed Action:

Stocks opened lower but closed near their highs on Monday as the bulls showed up and defended the 50 day moving average line for the Nasdaq and Nasdaq 100. Monday was another very heavy volume day in the market but the fact that the major indices closed near their respective highs is a short-term positive. Stocks rallied nicely on Tuesday as the Fed began their two-day meeting and support was defended on Monday. Economic data was light, the NFIB Small Business optimism index came in at 104.5, beating estimates for 104.0. Separately, inflation was not a concern, the producer price index (PPI) came in at 0%, missing the Street’s estimate for +0.1% gain. On Wednesday, the Fed raised rates by a quarter point and Janet Yellen was a little more hawkish than people expected. The Dow Jones Industrial Average jumped to a fresh record high while the Nasdaq, S&P 500 and Russell 2000 ended lower.

Thur & Fri Action:

Stocks fell on Thursday as other global central banks came in a little more hawkish than initially expected. The market is beginning to realize that the era of ultra-easy money from global central banks is winding down, if not over. Once again, tech stocks were under pressure for most of the day. Stocks were quiet on Friday as the market digested a busy week and focused on the big blockbuster deal from Amazon. Amazon said it will buy Whole Foods for $13.7 billion. Shares of Wal-Mart, Kroger, Target, and other competitors fell sharply while shares of Amazon and Whole Foods jumped on the news.

Market Outlook: A More Cautious Tone Sets In

The market is split at best and the key now is to focus the health of this pullback. Will it be another short pullback in both size (small percent decline) and scope (short in duration) or something more severe? As always, keep your losses small and never argue with the tape. Want Adam To Be Your Personal Portfolio Consultant? You Don’t Have To Feel Alone In The Market, There Is A Better Way: Learn More

14 Jul
Daily Market Commentary

Stocks End Week Mixed As Earnings Season Officially Begins

SPX- Bulls Defend 50 DMA Line

SPX- Bulls Defend 50 DMA Line

Friday, July 13, 2012
Stock Market Commentary:

Stocks and a slew of other “risk-on” assets spent most of the week in the red before staging a strong rally on Friday to help send them into positive territory. The big catalyst for the week was stronger-than-expected earnings reports from US companies, especially JP Morgan (JPM) and Wells Fargo (WFC). The market is back in rally-mode which suggests the path of least resistance is higher. The current rally began on the June 29, 2012 follow-through day (in the immediate wake of late June’s EU summit). At this point, investors appear to be looking past the larger macro concerns (e.g. a slowing global economy, European debt crisis, fiscal and monetary cliff in the US, et al) as they continue to snap up risky assets.

Monday-Wednesday’s Action- Stocks Quiet Ahead of JPM & WFC Earnings:

Stocks ended lower on Monday as investors digested disappointing economic data from Asia and Spanish yields topped the closely watched 7% level. The Chinese consumer price index (CPI) rose +2.2% year-over-year. Meanwhile, core machinery orders in Japan tanked -14.8% month-over-month which missed estimates and bodes poorly for the global economy. Yields for Spanish 10-yr debt topped 7% for the umpteenth time this year. Historically, 7% or higher is considered a danger zone for sovereign debt so we’ll have to see how this plays out. After Monday’s close, earnings season officially began when Aloca (AA) reported their Q2 results. The aluminum giant reported a loss but beat estimates. AA shares fell close to -5% on Tuesday. Remember, as we make our way through earnings season, that it is very important to not only focus on the actual earnings data but focus on how individual stocks and the major averages react to the numbers. One of our trading secrets, that has helped us outperform the market since our inception in 2004, is to focus more on how stocks react to the news, than the actual news itself. 

Stocks fell on Tuesday after several US companies issued profit warnings and the latest dark clouds in Europe resurfaced. Stocks opened higher but closed lower, which is a sign of weakness, not strength, after EU officials gave Spain an additional year to meet a 3% budget deficit target. Euro-zone finance officials also agreed to allow Spain’s banks to access up to 30 billion euro ($36.9B) in additional funding by the end of July. The final figure, which will be announced on or before July 20, could hit 100 billion euros.  However, stocks fell after Italian Prime Minister Mario Monti reaffirmed that his country will not need a bailout but might access Europe’s stability fund, if needed. In the US, the National Federation of Independent Business said its small business index, which measures small business sentiment, fell hard in June for the second consecutive month. This bodes poorly for the ongoing economic recovery. 

Stocks fell on Wednesday after the minutes of the latest Fed meeting showed that they are not interested in another round of monetary easing anytime soon. The Fed said: “further policy stimulus likely would be necessary to promote satisfactory growth,”and that the Fed should study ‘new tools’ for easing.”  Several members of the FOMC are also concerned with a “significant slowdown” in China. This disappointed investors as they desperately want more easing from the Fed to help stimulate a slowing US and Global economy. Elsewhere, Brazil’s central bank cut its benchmark interest rate by 50 basis points to 8% which matched expectations. This is their latest rate cut to help stimulate their slowing economy.

Thursday & Friday’s Action- JPM & WFC Top Estimates:

Stocks opened sharply lower on Thursday but spent the rest of the day erasing earlier losses to close near the session’s highs. Stocks soared on Friday as investors digested the latest round of economic and earnings data. Before Friday’s open, overall producer prices swelled by +0.1% in June which topped the Street’s estimate for a decline of -0.6%. Meanwhile, core prices, which exclude food and energy, rose by +0.2% in June which matched estimates. The big news was that both JPM and WFC surprised the Street by reporting stronger-than-expected Q2 earnings results. This bodes well for earnings season and helped allay a lot of concerns that the US financial sector was suffering.

Market Outlook- Rally Under Pressure

From our point of view, the current rally is in a confirmed rally which means the path of least resistance is higher. It is somewhat encouraging to see all the major averages close above their respective 50 DMA lines. Technically, the 200 DMA line and June’s lows are the next level of support while April’s highs are the next level of resistance for the major averages.  As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!

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18 Aug
Daily Market Commentary

Selling Resumes!

Thursday, August 18, 2011
Stock Market Commentary:

Stocks gapped down on Thursday as fresh fears spread regarding European debt. In the U.S., the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s (8.16.11) lows hold- there is a strong chance that the markets may be forming a short-term low. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce. Near term resistance remains the 200 DMA line and near term support remains the 2011 lows (last week’s low).

EU Debt & Lackluster Economic Data Hurts Stocks!

Before Thursday’s open, overseas markets were down several percentage points after news spread that a European bank borrowed $500M from the ECB. This sparked fresh concerns that European banks may be under severe stress. Economic data in the U.S. was not ideal. The Labor Department said weekly jobless claims rose to 408,000 which topped the Street’s estimate for 400,000. This bodes poorly for the ailing jobs market and by extension the broader economy.
Separately, the consumer price index (CPI) rose by +0.5% in July which easily topped the Street’s estimate for a +0.2% increase. This echoes Wednesday’s higher than expected produce price index (PPI) which suggests inflation may be accelerating. If inflation continues to increase, then the Fed will be under pressure to raise rates in the near future. The Philly Fed Survey tanked to -30.7 which was way below the Street’s estimate for 1.0. Existing home sales slid last month to an annualized rate of 4.67 million, which is less than the rate of 4.87 million units that had been expected. On a positive note, leading indicators edged higher +0.5% in July which topped the +0.2% estimate.

Market Outlook- Market In A Correction

The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.

09 Aug
Daily Market Commentary

Day1 Of A New Rally Attempt

Tuesday, August 9, 2011
Stock Market Commentary:

Stocks rallied nicely on Tuesday ahead of the Fed’s much anticipated meeting. This will be the first official Fed meeting since the Standard & Poor’s downgraded the U.S.’ AAA credit rating to AA+ on Friday 8/5/11. Tuesday marked Day 1 of a new rally attempt which means that as long as Tuesday’s lows are not breached, the earliest a possible follow-through day (FTD) can emerge will be Friday. However, if Tuesday’s lows are breached, then all bullish bets are off the table and the day count will be reset. It was also healthy to see stocks positively reverse (close higher) from a new 2011 low. Normally, but not always, reversals (both positive and negative) mean that the near term trend has changed. It is also important to note that some of the stock market’s largest moves (both “up” and “down”) occur during corrections/bear markets. Since we are clearly in the middle of a severe correction as all the major averages and a slew of leading stocks got smacked in heavy volume it is imperative to play defense until a new rally is confirmed. It is also important to be on the look out for very attractive rallies which are also known as “sucker rallies” because they suck you in and then resume another leg lower. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges.

Stocks Flirting With Bear Market Territory & QE 2 Gains Are Toast:

The small-cap Russell 2000 index has plunged a whopping -25% over the past few weeks which easily puts that index into “bear market” territory. Traditionally, Wall Street defines bear markets when any market declines by >-20% from a recent high. The S&P 500 and Dow Jones Industrial average fell as much as -17% and -15% respectively over the past few weeks, which is not “healthy” action. Meanwhile, the tech-heavy Nasdaq composite fell -18% for Tuesday’s bounce. It is also worrisome to see that all the gains (nearly 10 months) of QE 2 have disappeared in only two weeks! The two areas of strength remain bonds and gold. Gold has surged to a fresh record high of $1782/ounce and the VIX (volatility index) surged over +50% this week and remains at disturbingly high levels. This, ladies and gentlemen, is not healthy action. Trade wisely.

Inflation Jumps In China, U.S. Productivity Falls in the U.S., & Bernanke Holds Rates Steady:

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28 Jul
Daily Market Commentary

Stocks Quiet Ahead of GDP & House Vote!

Thursday, July 28, 2011
Stock Market Commentary:

Stocks were relatively quiet on Thursday after jobless claims topped estimates, the latest round of corporate earnings were announced, and the debt stalemate continued in D.C.. It is a bit worrisome to see the Nasdaq 100 negate its latest breakout and pull back along side the other major averages. Technically, the current rally is under pressure as all the major averages are pulling back towards their respective 50 DMA lines. The Dow Jones Industrial Average & benchmark S&P 500 index sliced and closed below their respective 50 DMA line which is not a healthy sign. Looking forward, the next level of support are the 2011 lows/the 200 DMA lines and the next level of resistance are the 2011 highs.

Debt Deadline Approaches, Economic Data & Earnings Help Stocks:

Before Thursday’s open, the Labor Department said jobless claims fell by a seasonally adjusted -24,000 to 398,000 last week.  It was somewhat encouraging to see claims fall below –400,000 for the first time since April 2. In case you do not know, most economists view 400,000 as the dividing line between job growth and job contraction. So it will be interesting to see if this is a one off or the beginning of a new trend (stronger job growth). Earnings news was mixed, Crocs Inc. (CROX), Skechers USA (SKX), and Green Mountain Coffee (GMCR) all rallied while Exxon Mobil (XOM) and Akamai Technologies (AKAM) fell after releasing their numbers. After Thursday’s close, the House is scheduled to vote on a Boehner’s latest plan, a slew of earnings are slated to be released, and Q2 GDP will be released before Friday’s open. It goes without saying, it will be a very ‘busy’ 24 hours.
Market Outlook- Rally Under Pressure
The latest action in the major averages suggests the current rally is under pressure. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.
 

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11 Dec
Daily Market Commentary

Week In Review- Stocks End Mixed

Friday 12.11.09

Market Commentary:

For the week, the Dow Jones Industrial Average closed higher as the benchmark S&P 500 and the tech-heavy Nasdaq composite closed flat to slightly lower. Volume, an important indicator of institutional sponsorship, contracted compared to the prior week’s totals which was  a somewhat healthy sign as the major average continue building their current bases. New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange which was another welcomed sign.

Monday: The Dollar & Commodities:

Stocks ended mixed on Monday as the dollar edged higher and commodities pulled back. This theme prevailed for most of the week and began on Friday December 4, 2009 when the Labor Department smashed estimates when they released November’s nonfarm payrolls report (employers only cut -11,000 jobs and the unemployment rate eased to 10%, down from a 26-year high of 10.2%). For the week, gold and crude oil got smacked, both pulling back sharply. After rallying for several weeks, on Thursday December 3, 2009 gold negatively reversed after hitting a new all time high of $1,226.40 and hasn’t looked back since. Crude oil slid as below $70 a barrel in New York as demand waned and supply rose.

The Fed:

Federal Reserve Chairman Ben Bernanke gave a speech at the Economic Club of Washington D.C. and said it was too early to determine the sustainability of the recovery. Bernanke also said that he sees modest economic growth in 2010 and does not believe inflation is a threat at this point. He also said that tight credit markets and a 10% unemployment rate could hinder future economic growth.

Tuesday & Wednesday:

Stocks slid on Tuesday after a series of negative headlines hit the wires: tepid economic data was released from Germany, several credit-rating companies highlighted the risk of huge government deficits in the developed world, Greece’s credit rating was downgraded, and Dubai World’s Nakheel PJSC said it lost $3.65 billion. Stocks advanced on Wednesday thanks in part to a late day decline in the US dollar. Japan’s government said that the world’s second largest economy grew at a +1.3% annualized rate last quarter which was way below the +4.8% level reported last month. The sharp downward revision caught nearly everyone off guard and sparked concern that a double dip recession is likely. In Europe, Standard & Poor’s lowered Spain’s credit outlook to “negative” and said they were concerned with the country’s slow economy and massive deficit spending.

Thursday & Friday:

Stocks edged higher on Thursday after positive trade data offset concerns about an increase in weekly unemployment claims. Before Thursday’s opening bell, the Labor Department said jobless claims topped expectations and rose last week to 474,000 after falling for five straight weeks. However, the bulls found comfort in the fact that the four-week average, which smooths out the data and is less volatile, slid to its lowest level since September 2008. Elsewhere, the Commerce Department said the trade deficit narrowed to $32.9 billion in October. The report showed that exports surged in October thanks in part to a weaker dollar. Furthermore, this was the sixth consecutive month that exports rose which bodes well for the US economy.
On Friday, investors cheered after two better-than-expected reports were released: retail sales and consumer confidence. However, stocks came under a little pressure in the afternoon when the House of Representatives passed legislation to create a Consumer Financial Protection agency which will monitor risk at large financial firms.

Important Support & Resistance Levels:

Looking at the recent action in the market, the major averages continue acting well as long as they remain perched just below resistance (their respective 2009 highs) and above their respective 50-day moving average (DMA) lines. Both these factors are considered healthy and bode well for this 8-month rally. The Nasdaq continues to experience formidable resistance just above 2,200 while the benchmark S&P 500 Index faces resistance just above 1,115. The blue chip Dow Jones Industrial Average remains the strongest of it peers and currently faces resistance just above 10,500. Until the major averages close above or below support or resistance, expect the bracketed (sideways) action to continue.

10 Dec
Daily Market Commentary

Stocks Edge Higher On Mixed Volume

Thursday 12.10.09

Market Commentary:

Stocks rallied on Thursday after healthy trade data helped offset concerns about an increase in weekly unemployment claims. Volume, an important indicator of institutional sponsorship, was mixed when compared to Wednesday’s levels; lower on the NYSE and higher on the Nasdaq exchange. There were 24 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, greater than the total of 13 issues that appeared on the prior session. New 52-week highs outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data:

Before Thursday’s opening bell, the Labor Department said jobless claims topped expectations and rose last week to 474,000 after falling for five straight weeks. However, the bulls found comfort in the fact that the four-week average, which smooths out the data and is less volatile, slid to its lowest level since September 2008. Elsewhere, the Commerce Department said the trade deficit narrorwed to $32.9 billion in October. The report showed that exports surged thanks in part to a weaker dollar. In addition, exports rose for a sixth consecutive month which bodes well for the U.S. economy.

Timothy Geithner on Capital Hill:

Treasury Secretary Timothy Geithner testified before the Congressional Oversight Panel on Thursday. Geithner wants the government to extend the $700 billion TARP plan as the financial system recovers from last year’s crisis. He said that extending the TARP plan will help U.S. banks remain properly capitalized. Remaining properly capitalized will help financial institutions address potential threats that may arise in the future. Doing this will reduce the need for future government intervention if another financial shock occurs.

Afternoon Weakness:

Around 2:30pm EST, the bears showed up and put pressure on the major averages. The small cap Russell 2000 index turned lower and slid into negative territory after being up for most of the day. The small cap index closed just above its 50 day moving average as it continues working on the right side of its current base. It is also important to note that since the March low, small caps have outperformed their larger cap brethren. However, since the end of Q3, that relationship reversed and large caps are currently outperforming their peers. Leadership remains scarce as many stocks continue building bases.