Daily Market Commentary

Sour Economic Data Hurts Stocks

19 Nov

Stocks Got Smacked As The Dollar Rallies:

Stocks fell across the globe as the US dollar rallied and concern spread regarding the underlying health of the economic recovery. Volume, a critical component of institutional demand, was higher than Wednesday’s levels across the board which marked a distribution day for the major averages. Decliners trumped advancers by about a 4-to-1 ratio on the NYSE and Nasdaq exchange. There were only 10 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, lower than the 40 issues that appeared on the prior session. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.

Tepid Economic Data Hurts Stocks

Stocks experienced their largest intra day decline this month after the latest round of ominous economic data was released. The tepid economic data led many to question how long the global economic recovery will last and sent investors flocking to the US dollar for perceived safety. Before Thursday’s opening bell, the Labor Department said jobless claims (a.k.a the number of Americans filing claims for unemployment benefits) was unchanged at a 10-month low. Stocks also got hit after a report was released that showed mortgage delinquencies surged. So far, since the financial crisis began in 2007, writedowns (a.k.a losses) of mortgage-backed debt has surpassed $1.7 trillion at some of the world’s largest financial firms. The spike in mortgage delinquencies was due to a 26-year high in unemployment and a down tick in wages. The Mortgage Bankers Association said that that out of every six home loans insured by the Federal Housing Administration there is at least one late payment and +3.32% of those loans were in foreclosure last quarter. This was the highest reading for both measures in at least 30 years and bodes poorly for the troubled housing market.
Elsewhere, the Organization for Economic Cooperation and Development (OECD) doubled its growth forecast for industrialized nations in 2010 to +1.9%. However, the group said that record debt levels may hinder future growth. Separately, the Federal Reserve Bank of Philadelphia released its general economic index which topped estimates and suggests a slight improvement in that region. Billionaire investor, Bill Gross, who runs the world’s largest bond fund- Pacific Investment Management Co. (PIMCO) in Newport Beach, California, published a report today and said that he believes record low interest rates may cause new asset bubbles for stocks and risky bonds.

Looking At The Market- Analyzing Price & Volume:

Looking at the market, leading stocks came under a little pressure today but for the most part continue to hold up well. The market caught a bid (rallied) in the last hour of trade which is typically an encouraging sign and shows that buyers are still out there and willing to show up and defend support. Highly liquid technology stocks continue to be an important area of strength as investors continue to pile into a very narrow group of stocks. Gold and silver stocks are another important area that continues to outperform. As always, it is imperative to isolate strength and let the market guide you.

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09 Jun
Daily Market Commentary

Week-In-Review: Big Shift On Wall Street; Investors Sell Leaders, Buy Laggards

Big Shift On Wall Street; Investors Sell Leaders, Buy Laggards

The market is pulling back from over-bought conditions. Something important happened on Friday, when big investors dumped tech stocks (leaders) and bought laggards (small-caps and other under-performing sectors such as biotechs, retail, and financials, just to name a few). In the short term, last month’s lows are the next level of support to watch, then the 50 DMA line for the S&P 500, Dow Industrials, Nasdaq Composite, and Nasdaq 100. After that, 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. The Russel 2000 tried to break out of range after moving sideways all year which bodes well for this ongoing and aging bull market. Keep in mind, if the selling gets worse, a defensive stance is warranted.

Mon-Wed Action:

Stocks were quiet on Monday as investors waited for a big week of data. The PMI service index came in at 53.6, missing estimates for 54.0. Factory orders fell to negative -0.2%, which matched estimates. The ISM non-manufacturing index came in at 56.9, missing the Street’s estimate for 57.0. Stocks slid on Tuesday as investors waited for the ECB and Mr. Comey’s testimony on Thursday. In the afternoon, after ABC News reported, citing a source, that former FBI director James Comey will not say that President Donald Trump obstructed justice. But that did little to excite investors. MBA mortgage applications came in at +7.1%, beating last week’s -3.4% reading.

Thur & Fri Action:

Stocks were quiet on Thursday even after the ECB meeting and Mr. Comey spent most of the day testifying on Capitol Hill. Friday was a big day on Wall Street as investors finally dumped some of the high-flying tech stocks and bought some of the lagging sectors. At one point, the Nasdaq was down 2% after several big cap tech stocks fell in heavy volume. Overnight, Theresa May lost a big election which changed the balance of power post-brexit.

Market Outlook: A More Cautious Tone Sets In

A slew of leading stocks fell hard on Friday which is rarely a good sign. The key now is to ascertain 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

19 May
Daily Market Commentary

Week-In-Review: Stocks Bounce Back After Mid-Week Sell-Off

Stocks Bounce Back After Mid-Week Sell-Off

Last week, the market complexion changed and is a little weaker which means a defensive stance is warranted in the short-term. One of the hallmarks of a bull market is to see the market brush off nearly all negative news and just keep racing higher. Since the election, that was exactly what has been happening, but that dynamic changed last week. The market sold off hard on Wednesday after news broke about the Comey memo. Once again, the sell-off was very short in nature and the bulls showed up on Thursday and Friday, helping repair some of the damage. In the short term, last week’s lows are the next level of support to watch, then the 50 DMA line for the S&P 500, Nasdaq Composite, and Nasdaq 100. Then, 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 an intermediate and longer term time-frame. We are often asked about why the market is holding up so well with everything that is happening in the political arena. The answer is simple: investors only care about what policies come out of D.C. that directly impact Main Street or Wall Street. So far, the policies have been bullish for the economy and, as investors look forward there appears to be more economic-friendly policies in the pipeline. As previously mentioned, the other, more important, reason is that we are in a very strong bull market, and we pay much more attention to how the market reacts to the news.

Mon-Wed Action:

The S&P 500 and Nasdaq hit record highs on Monday, led higher by big cap tech stocks. Economic news was light. The National Association of Home Builders survey showed sentiment among home builders hit 70 for May, which was nicely higher than last May’s reading of 58. Elsewhere, the Empire State manufacturing index fell to -1 in May from positive 5.2 in April. Stocks were quiet on Tuesday as the political drama in D.C. continued. Stock futures began falling after Tuesday’s close, when a report surfaced that former FBI Director James Comey wrote a memo that said President Donald Trump allegedly asked him to stop an investigation into Michael Flynn, the former national security adviser. Overnight, the selling intensified and investors spent the whole day on Wednesday aggressively dumping stocks. The U.S. dollar also fell as the political drama from D.C. hurt confidence in the greenback. So far, Wednesday was the single largest decline of the year.

Thur & Fri Action:

Stocks, and the U.S. dollar, edged higher on Thursday after the buy-the-dip crowd showed up after 2017’s largest single day decline. Stocks rallied on Friday as buyers showed up up after Wednesday’s sell-off. President Trump took his first official trip to the Middle East and oil prices jumped back above $50/barrel after OPEC said it may extend production cuts. 

Market Outlook: Stocks Are Strong

The market is very strong. 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

12 May
Daily Market Commentary

Week-In-Review: Stocks End Mixed As Retail Stocks Sink

Stocks End Mixed As Retail Stocks Sink

Stocks ended mixed to mostly lower last week as investors digested the latest round of economic, political, and earnings data. The big take-away last week for the market was a slew of retail stocks gapped down after reporting earnings. On a positive note, the Nasdaq and Nasdaq 100 continue to outperform while the small-cap Russell 2000 continues to lag. The Dow & S&P 500 are acting relatively well as they continue tracing out bullish 3-week “handle” patterns just below record highs. The next important near term level of support to watch is the 50 day moving average line for the major indices. After the 50 DMA line, the next important levels of support to watch are: Russel 2000: 1335, then 1308, Dow Industrials: 20,379, then 20.1k, S&P 500: 2322.25, then 2300, Nasdaq Composite: 5769.39, then 5669. Until those levels are breached on a closing basis, the bulls remain in control. We are often asked about why the market is holding up so well with everything that is happening in the political arena. The answer is simple: investors only care about what policies come out of D.C. that directly impact Main Street or Wall Street. So far, the policies have been bullish for the economy and, as investors look forward there appears to be more economic-friendly policies in the pipeline. The other, more important, reason is that we are in a very strong bull market, and we pay much more attention to how the market reacts to the news. So far, the market action is bullish.

Mon-Wed Action:

Stocks were quiet on Monday after Emmanuel Macron won the French election. In other news, Sinclair Broadcast agreed to acquire Tribune Media for $3.9 billion, or $43.50 per share. Separately, Coach agreed to buy Kate Spade for $2.4 billion, or $18.50 per share, in an effort to resonate more with younger consumers and revive its brand. Additionally, the CBOE Volatility Index (VIX), fell below 10, for the first time in over decade. The last time that happened was 2007 and we all know what happened in 2008. Stocks fell on Tuesday after North Korea’s ambassador said the country will proceed with a nuclear test. After the close, President Trump fired FBI director James Comey which surprised many pundits but barely moved the market. Stocks ended mixed to lower on Wednesday after Disney and Boeing dragged the Dow lower. 

Thur & Fri Action:

Stocks fell on Thursday after Macy’s ($M) gapped down 17% after reporting earnings. The new over hyped IPO, Snap, was also clobbered after reporting earnings. In economic news, the producer price index grew by +0.5% in April, beating estimates of +0.2%. Initial jobless claims, came in at 236,000, just below the Street’s estimate for 245,000. Stocks were quiet to mostly lower on Friday after JC Penney plunged 10% after reporting earnings. JC Penney reported mixed quarterly results, with earnings beating expectations but same-stores sales missed estimates. The environment for retail stocks has been lousy in recent years and investors have very little to be bullish about in this beaten up sector.

Market Outlook: Stocks Are Strong

The market is very strong. 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

05 May
Daily Market Commentary

Week-In-Review: Stocks End Higher As Other Markets Crumble

Stocks End Week Higher As Other Markets Crumble

Stocks ended mixed to mostly higher last week as other markets crumbled and investors digested a plethora of earnings. A slew of currencies and commodities fell hard but sellers remained at bay on Wall Street. To be clear, we are still in a very strong bull market and until we see any major selling show up, the stock market has earned the bullish benefit of the doubt. The next important near term level of support to watch is the 50 day moving average line for the major indices. On a relative basis, the Nasdaq and Nasdaq 100 continue to out-perform the other popular indices. After the 50 DMA line, the next important levels of support to watch are: Russel 2000: 1335, then 1308, Dow Industrials: 20,379, then 20.1k, S&P 500: 2322.25, then 2300, Nasdaq Composite: 5769.39, then 5669. Until those levels are breached on a closing basis, the bulls remain in control.

Mon-Wed Action:

The Nasdaq jumped to a fresh record high on Monday. Bank shares also rallied after President Trump talked about breaking up the big banks. The market also digested several economic data points. The ISM manufacturing index slid to 54.8 in April from 57.2 and missed estimates. Construction spending slid in March from a record high. The Commerce Department said consumer spending remained flat in March, while personal income rose less than expected. The market edged higher on Tuesday as investors awaited a slew of high profile earnings to be released and the Fed began its two day meeting. Apple Inc reported after the bell and initially fell but turned higher by the end of the week. Stocks were quiet on Wednesday as the Fed ended its two-day meeting and left rates unchanged. The Fed said Q1 2017 GDP weakness was transitory and expects GDP to pick up by the end of the year.

Thur & Fri Action:

Stocks were quiet on Thursday even as crude oil plunged 5% and a slew of other commodities fell as well. Stocks are very strong as they simply refuse to budge even as other markets crumbled. On average, earnings remain positive as investors digested the latest round of earnings from Tesla, Facebook, and Regeneron, just to name a few. Before Friday’s open, the Labor Department said U.S. employers added 211,000 jobs in April and the unemployment rate fell to 4.4%. Economists polled by Reuters expected jobs growth of 185,000 and for the unemployment rate to hit 4.5 percent. Despite the strong beat, stocks were relatively quiet. 

Market Outlook: Stocks Are Strong

The market is very strong. 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

21 Apr
Daily Market Commentary

Week-In-Review: Stocks Edged Higher For The Week As Earnings Season Begins

Stocks Edged Higher Last Week As Earnings Season Begins

In Thursday’s pre-market report we noted that the market was ripe to rally, little did we know the Dow would soar nearly 300 points by the close. That’s just the way Wall Street works, when people want to step up and buy, they buy. Conversely, when people want to sell, they sell first and ask questions later. The 50 day moving average line is the next line in the sand to watch. On a relative basis, the Nasdaq and Nasdaq 100 continue to out-perform the other popular indices. The important levels of support to watch are: Russel 2000: 1335, then 1308, Dow Industrials: 20.4k, then 20.1k, S&P 500: 2322.25, then 2300, Nasdaq Composite: 5769.39, then 5669. Until those levels are breached on a closing basis, the bulls remain in control.

Mon-Wed Action:

Stocks edged higher on Monday led by financial stocks as investors waited for a slew of earnings to be released. Vice President Mike Pence said the “era of strategic patience” with North Korea was over but that failed to rattle markets. Pence made the comments on the border between North and South Korea a day after North Korea’s failed missile test. The Trump administration has made it clear that it is actively working with China and its allies on a response to North Korea’s missile program. The Dow fell 100 points on Tuesday after Goldman Sachs (GS) and Johnson & Johnson (JNJ) both fell after reporting earnings. Stocks closed mostly lower on Wednesday as investors continued to digest the latest round of big-cap earnings reports. This time, IBM dragged stocks lower after reporting earnings. 

Thur & Fri Action:

Stocks jumped nicely on Thursday after Treasury Secretary Steven Mnuchin hinted a tax deal may be reached sooner than expected and the latest round of earnings were released. Mr. Mnuchin said the administration was close to “major tax reform” which came after changed his earlier goal of passing tax reform by August. The White House said it will unveil a plan “very soon” and that was enough to send stocks sharply higher. Stocks were quiet on Friday after legendary Hedge Fund manager, Paul Tudor Jones, said, “U.S. Stocks Should ‘Terrify’ Janet Yellen,” and made the case that stocks were very over-valued.

Market Outlook: Market Breaks 50 DMA Line

The market is pulling back after a very strong post-election rally. 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 Apr
Daily Market Commentary

Week-In-Review: Geopolitical Fears Send Stocks Lower; Metals Soar

Geopolitical Fears Send Stocks Lower; Metals Soar

Stocks ended weaker last week and closed below important near term support (50 day moving average line) as the market continues to digest the very strong post-election rally. Last week was the first time we saw all of the major indices break down and close below their respective 50 DMA lines since the election which is not a good sign for the bulls. Remember, that, in and of itself, is not the end of the world but if the bulls do not show up quickly and quell the bearish selling, then lower prices will follow. As we have told you for the past month, defense is king as more and more important areas begin breaking down. The first “tell” that something was awry was the Russell 2000. It led on the way up after the election and then “stalled” in December and has been moving sideways since. Other macro markets also retraced most, if not all, of their post-election move (Gold, Silver, Mexican Peso, just to name a few). While that was happening, the other popular indices edged higher but one-by-one several important sectors stalled out and began to fall. As mentioned in prior reports, some of them are: Transports (IYT), Steel (SLX), Materials (XLB), Industrials (XLI), & Retail (XRT). Then, we saw the all-important Financials (XLF) and Semiconductor (SMH) stocks breakdown in recent days and that tipped the market to a much more defense stance. Moreover, as money was flowing out of equities we saw it flow into metals (gold and silver) and other safe-haven assets. For now, defense is still king until we see the market “bounce.” If the market can’t bounce and instead continues to fall, then odds favor we will see a deeper 5-10% pullback develop. The important levels of support to watch are: Russel 2000: 1335, then 1308, Dow Industrials: 20.4k, then 20.1k, S&P 500: 2322.25, then 2300, Nasdaq Composite: 5769.39, then 5669.

Mon-Wed Action:

Stocks closed a little higher on Monday as earnings season officially began and geopolitical tensions remained elevated. Gold and Silver rallied all week as investors dumped stocks and moved into safe-haven assets. Stocks fell on Tuesday as geopolitical tensions remained elevated. The Dow transports fell after shares of United Continental tanked after a passenger was dragged off an overbooked flight. Secretary of State Rex Tillerson said the U.S. will stand up against anyone who commits crimes against humanity. Separately, President Trump tweeted and said, “North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! U.S.A.” Stocks fell again on Wednesday after the greenback tumbled. The U.S. dollar fell hard after President Donald Trump told the Wall Street Journal he thought the currency was getting “too strong.” The dollar index, which tracks the greenback’s performance against six major currencies, fell to the lowest level in a month after Trump’s comments.

Thur & Fri Action:

Stocks fell hard on Thursday causing all of the major indices to slice, and close, below their respective 50 day moving average lines. Stocks fell and gold/silver soared after the U.S. dropped “the mother of all bombs” in Afghanistan to fight ISIS. Elsewhere, earnings season has been anticipated as a potential positive catalyst for stocks. So far, analysts believe earnings will grow 10.4% in Q1 2017 vs Q1 2016. According to Thomson Reuters, that is a little better than the 10.3% in the third quarter of 2014, and the best since the 18% growth experienced in the third quarter, 2011. Meanwhile, revenues are expected to grow by more than 7%, also the best since 2011. On Friday, stocks were closed for the holiday but tension continued to grow with North Korea. 

Market Outlook: Market Breaks 50 DMA Line

The market is pulling back after a very strong post-election rally. 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

31 Mar
Daily Market Commentary

Week-In-Review: Bulls Defend Support

Bulls Defend Support

Here’s how the market performed in Q1 (& so far in 2017): DJ Industrial Avg +4.56%, S&P 500 +5.57%, Nasdaq Comp +9.82%, Russell 2000 +2.13%. The title of last week’s article was: Market Tests Support. On cue, the bulls showed up earlier in the week and defended support for the major indices (50 DMA line which was highlighted for you in last week’s report). That was the first real test of the 50 DMA line since the election. For now, the bulls emerged victorious because that level was defended. Going forward, the bulls remain in control as long as the major indices remain above that important level. I do want to note that the tape is getting a little messy and several important areas of are below their respective 50 DMA lines: Transports (IYT), Steel Stocks (SLX), Russell 2000 (IWM), Mid-Cap 400 (MDY), Materials (XLB), just to name a few. Right now, there are three options: 1. the market bounces from here, lifting these areas back above their 50 DMA lines. 2. The major indices rollover and break below support. 3. The market moves sideways for a few months to consolidate the recent move. Until the market cracks, the bulls have earned the benefit of the doubt and the market likely heads higher from here.   

Mon-Wed Action:

Stocks fell on Monday as the major indices tested their respective 50 DMA lines for the first time since the election. The Dow Jones Industrial Average posted a 8-day slide which was the longest since 2011. The narrative of the day was that investors were concerned Trump’s tax reform bill would get blocked because the Healthcare bill didn’t pass. Stocks opened lower and closed higher on Tuesday after the bulls showed up and defended support (50 DMA line). The Dow snapped its 8-day losing streak and rallied nicely causing the buy-the-dip crowd to step in and buy the first real dip since the election. Stocks closed mostly higher on Wednesday after the United Kingdom passed article 50 which officially begins the Brexit process.

Thur & Fri Action:

On Thursday, the market rallied nicely as bank and energy stocks bounced back from deeply oversold levels. The Nasdaq posted a record close as tech stocks continue to shine. In other news, oil jumped above $50 a barrel as it also bounced back from oversold levels. Stocks were relatively quiet on Friday which was the last day of the month and quarter. 

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

10 Mar
Daily Market Commentary

Week-In-Review: Stocks Snap A 6-Week Win Streak

Stocks End Snap A 6-Week Win Streak

Stocks finally snapped a very strong 6-week win streak as the market finally paused to consolidate the recent and robust rally. Small caps continued to lag and ended lower which is a sign of near term fatigue. The Small-Cap Russell 2000 broke below its 50 DMA line which is not ideal in the near term. Meanwhile, the S&P 500, Dow Jones Industrial Average, and the Nasdaq composite closed near their respective 10 day moving average lines last week. The next level of support to watch is the 21 day moving average line, then the more important 50 day moving average line. The jobs report came in stronger than expected and which means the Fed will most likely raise rates by a quarter point on Wednesday.  That would mean rates will go from 0.50% to 0.75%, which is still very bullish for stocks. Fiscally, the environment remains promising and the Trump administration said that they plan to announce tax reform within six months. 

Mon-Wed Action:

Stocks fell on Monday as the market continued pulling back after the prior Wednesday’s near term high (the day after Trump’s speech to Congress). Geopolitical tensions swelled after North Korea fired 4 ballistic missiles into the water near South Korea. Separately, market expectations jumped to 86.4%, according to the CME Group’s FedWatch tool that the Fed will raise rates next week. The Fed will announce its decision on March 15th when it concludes its latest two day meeting. Stocks fell again on Tuesday after the House GOP released its plan to repeal Obamacare. Biotech stocks led the way lower as consensus spread that the new plan will bring down drug prices. Stocks were quiet on Wednesday to mostly lower after oil prices plunged 5.4%. A slew of other commodities also fell after a big run. Separately, ADP, the country’s largest payrolls company, said U.S. employers added 298,000 new jobs last month, easily beating estimates for 190,000. The report represents the first full month under President Donald Trump, who has pledged to rebuild the nation’s aging infrastructure system and stimulate the economy. Billionaire Investor, David Tepper, went on CNBC and was bullish on stocks and bearish on bonds.

Thur & Fri Action:

Stocks were quiet on Thursday after the European Central Bank (ECB) held rates steady and said low rates are here to stay for an extended period of time. The ECB left its headline rate at 0%, its marginal lending rate at 0.25%, and its deposit facility rate at negative -0.4%. On Friday, the Labor Department said U.S. employers added 235,000 new jobs last month, easily beating estimates for around 200,000.

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. The ECB extended QE in December and will print another 2.4T to stimulate markets and the global economy. The U.S. Fed only raised rates once in 2016, by a quarter point to 0.50%, 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.  Schedule a complimentary appointment today –  Do You Feel Alone In The Market? There Is A Better Way: Learn More

06 Mar
Media Quotes

CNBC: Stocks Close Lower As Financials and Materials Lag; March Rate Hike Becomes More Likely

Monday, March 06, 2017
U.S. equities fell on Monday as the chances of tighter monetary policy from the Federal Reserve sunk in for investors, while geopolitical concerns increased.
“It feels like the fundamental picture is still there,” said Art Hogan, chief market strategist at Wunderlich Securities. “But at the same time you’ve got some events happening in March that are getting people worried. I think you’re starting to see that.”
The Dow Jones industrial average closed about 50 points, with Travelers contributing the most losses. The S&P 500 declined 0.3 percent, with financials and materials leading decliners. The Nasdaq pulled back around 0.4 percent.
Market expectations for a rate hike were 86.4 percent Monday, according to the CME Group’s FedWatch tool. The Fed’s monetary policy committee is set to meet between March 14 and 15.
“The March rate hike doesn’t matter. What matters is how many times they raise,” said Jeremy Klein, chief market strategist at FBN Securities. “If they stay at three times [for this year], then the market will be fine.”
The only potential obstacle for the Fed to raise rates at this point is the February jobs report, which is scheduled for release on Friday. Economists polled by Reuters expect the U.S. economy to have added 186,000 jobs last month.
“I think the market treads water ahead of the jobs report. That could give you the next 15 percent” in rate hike expectations, said Kim Forrest, senior equity analyst at Fort Pitt Capital. “But if it’s a dramatic miss, it could take it off the table.”
Investors also kept an eye on the geopolitical front after North Korea fired four ballistic missiles Monday, three of which landed in Japan’s exclusive economic zone, according to Japanese Prime Minister Shinzo Abe.
The Japanese Nikkei 225 fell 0.46 percent overnight, lagging the rest of the region.
Meanwhile, in Europe, stocks declined broadly as bank stocks were led lower by Deutsche Bank. Germany’s biggest lender announced it will raise $8.5 billion to boost its capital position and has set new financial targets.
“At the same time, the bank is going to cut its stake in asset management units by focusing more on its core business,” said Naeem Aslam, chief market analyst at Think Markets in London. “Deutsche Bank is going to remain on traders’ dashboards as they try to make sense of company’s future.”
Deutsche’s U.S.-listed shares fell 3.8 percent, while the pan-European Stoxx 600 index pulled back 0.52 percent.
Stocks in the U.S. are coming off a record-setting week after a speech from President Donald Trump lifted expectations that the administration’s agenda — especially regarding tax reform and deregulation — could become reality in the near future.
However, the Trump administration called for an investigation Sunday on whether former president Barack Obama wiretapped Trump Tower during last year’s election. Trump originally leveled the accusations against Obama on Saturday via Twitter, but did not provide and evidence supporting them.
“If the dynamic changes and the market believes Trump’s pro-growth agenda will not go through, that would change the game on Wall Street,” said Adam Sarhan, CEO of 50 Park Investments.
Trump signed a new travel ban Thursday, doubling down on the most divisive action of his young presidency.

Symbol
Name
Price
Change
%Change
DJIADow Industrials20954.34
-51.37-0.24%
S&P 500S&P 500 Index2375.31
-7.81-0.33%
NASDAQNASDAQ Composite5849.17
-21.58-0.37%
The Dow Jones industrial average fell 51.37 points, or 0.24 percent, to close at 20,954.34, with Travelers leading decliners and Caterpillar leading advancers.
The S&P 500 declined 7.81 points, or 0.33 percent, to end at 2,375.31, with materials and financials leading 10 sectors lower and energy as the only riser.
The Nasdaq dropped 21.58 points, or 0.37 percent, to close at 5,849.17.
About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 795.71 million and a composite volume of 3.224 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.3.
—CNBC’s Jacob Pramuk, Aza Wee Sile and Reuters contributed to this report.
On tap this week:
Monday
CERAWeek conference begins
3:00 p.m. Minneapolis Fed President Neel Kashkari
Tuesday
Earnings: Brown-Forman, H&R Block, Michaels Cos, Dick’s Sporting Goods, Urban Outfitters, Navistar
8:30 a.m. Trade deficit
3:00 p.m. Consumer credit
Wednesday
Earnings: Adidas, Bob Evans, Ciena, Express, Hovnanian, Children’s Place, Camping World, Sunrun, United Natural Foods
8:15 a.m. ADP payrolls
8:30 a.m. Productivity and costs
10:00 a.m. Wholesale trade
Thursday
Earnings: Staples, Ulta Beauty, El Pollo Loco, Verifone, Zumiez, International Game Technology, Party City, Signet Jewelers, Embraer
7:45 a.m. European Central Bank rate decision
8:30 a.m. ECB President Mario Draghi briefing
8:30 a.m. Jobless claims
8:30 a.m. Import prices
Friday
Earnings: The Buckle, Vail Resorts
8:30 a.m. Employment report
2:00 p.m. Federal budget

 
LINK: http://www.cnbc.com/2017/03/06/us-markets.html

24 Feb
Daily Market Commentary

Week-In-Review: Stocks End Mixed On Trump's 5th Week In Office

Stocks End Mixed On Trump’s 5th Week In Office

Stocks ended mixed to mostly higher on Trump’s 5th week in office. The relentless rally, coupled with the inability for stocks to fall in a meaningful fashion, illustrates how strong the bulls are right now. The more we scan the market and look at leading stocks, sectors and industry groups, the more this feels like the very early stages of a 1999/1929 style climax/blow-off top. Of course, we are open for any possible scenario that may unfold but, for now, we are in a very strong bull market and weakness should be bought, not sold. The major indices are very extended from nearly all moving averages and a nice light volume pullback would be healthy for this aging bull market. The strength is broad based as big money continues to flow into the major indices and several important sectors: Financials ($XLF), Materials ($XLB), Industrials ($XLI), Steel ($SLX), and Technology, just to name a few. As long as pullbacks remain very shallow in both size (small % decline) and scope (short in duration), the bulls remain in clear control of this market. The first level of support to watch is 10 day moving average, then the 21 DMA, then the 50 DMA for the major indices.

Mon-Wed Action:

Stocks were closed on Monday for Presidents’ Day. On Tuesday, stocks rallied nicely as investors continued to buy stocks. The White House announced Monday that Lieutenant General H. R. McMaster will become the new national security advisor. McMaster replaces Michael Flynn, who resigned last week. Economic news was light. The flash read on the IHS Markit U.S. purchasing managers’ index came in at 54.3 in February, falling slightly from January’s 14-month peak. The “latest survey data indicated that business optimism moderated among U.S. private sector firms in February, driven by weaker confidence across the service economy,” IHS said. Stocks were relatively quiet on Wednesday as investors digested the recent and very strong rally. The Fed Minutes hinted that more rate hikes may be on the horizon, especially if Trump’s policies do indeed spur economic growth. In economic news, weekly mortgage applications slid by 2% amid tepid refinancing levels. A separate report showed that existing home sales grew by 3.3% in January.

Thur & Fri Action:

Stocks were relatively quiet on Thursday after the new Treasury Secretary, Steve Mnuchin, said a “very significant” tax reform will be passed by August. Mnuchin said, “We’ve been working closely with the leadership in the House and the Senate and we’re looking at a combined plan.” Stocks have soared since the election, thanks, in part, to Trump’s pro-business policies, deregulation, and a big tax cut in the near future. Stocks slid on Friday as they pullback from very extended levels. Stocks opened lower and closed slightly higher on Friday as the bulls continue to buy nearly every dip in the market. President Trump signed another executive order which is designed to further cut regulations. Trump signed a regulatory reform task force which will evaluate major federal regulations and recommend whether to keep, repeal or change them.

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. The ECB extended QE in December and will print another 2.4T to stimulate markets and the global economy. The U.S. Fed only raised rates once in 2016, by a quarter point to 0.50%, 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.  Schedule a complimentary appointment today –  if you want Adam to manage your portfolio or talk about your investment needs. Visit: 50Park.com

27 Jan
Daily Market Commentary

Week In Review: Stocks Soar On Trump's 1st Week In Office

Stocks Rally On Trump’s 1st Week In Office

The bulls have been waiting for a catalyst to send the Dow above 20k and it turned out to be Trump’s first week in office. The Dow broke above 20k and the S&P 500 briefly broke above 2,300 over the past few days. The key now is to see if the gains can hold. Elsewhere, the Nasdaq and Nasdaq 100 both hit fresh record highs while the small-cap Russell 2000 is still consolidating its very strong post-election gain. Since Trump won the election the market has been in a very bullish state. The bullish backdrop occurred when a very easy monetary policy (from global central banks) collided with a bullish fiscal policy. Moving forward, until we see any significant selling, this trading window (bullish state), clearly suggests weakness should be bought, not sold. I would be remiss not to note that the major indices are getting extended and a nice light volume pullback would do wonders to restore the health of this market. 

Mon-Wed Action:

Stocks ended a little lower on Monday on Donald Trump’s first official day in office. As promised, President Trump met with Business CEOs and made it clear that he is focused on creating an environment in which businesses can thrive. In the meeting, Trump made it clear that he wants to cut regulations and cut taxes. Stocks rallied on Tuesday after the bulls showed up and defended major support (50 DMA line) in many important areas. The benchmark S&P 500 and Nasdaq Composite closed at fresh record highs while the Dow closed below 20,000. The financials, materials, energy transports and small caps were among key areas that surged off their respective 50 DMA lines. Once that happened, more buyers showed up and stocks just raced higher. Stocks soared on Wednesday fueled by more action from President Trump. On Tuesday, President Trump signed executive orders that will make it easier for TransCanada to build the Keystone XL pipeline. On Wednesday, Trump made it clear that he’s ready to build the Wall on our southern border. The fact that Trump is moving swiftly on his pro-growth policies was enough to send stocks higher and help the Dow top 20,000 for the first time in history.

Thur & Fri Action:

Stocks closed on mixed on Thursday as investors digested the latest round of earnings, economic and political data. Earnings were mixed with some large cap stocks gapping up and some gapping down. Economic data was also mixed. U.S. new home sales fell to 536K, missing estimates for 593K. Weekly jobless claims rose to 259K, missing estimates for 246K. The PMI services index came in at 55.1, higher than the last reading of 53.4. Leading indicators rose 0.5%, beating estimates for 0.4%. Stocks were quiet on Friday as investors digested the latest round of mixed earnings and economic data. The first reading on Q4 2016 GDP came in at 1.9%, missing estimates for 2.2%. Durable goods also missed estimates and came in at -0.4%, compared to the 2.6% forecast. Finally, consumer sentiment came in at 98.5, beating estimates for 98.2.

Market Outlook: Strong Action Continues

The market remains strong as the major indices broke out and hit fresh record highs. The bulls have a very strong fundamental backdrop of monetary and fiscal policy. The ECB extended QE in December and will print another 2.4T to stimulate markets and the global economy. The U.S. Fed only raised rates once in 2016, by a quarter point to 0.50%, 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.  Schedule a complimentary appointment today –  if you want Adam to manage your portfolio or talk about your investment needs. Visit: 50Park.com

22 Apr
Daily Market Commentary

Week-In-Review: Stocks Stall Below Major Resistance

11 SPXD- below amjor resisstanceStocks Stall Below Major Resistance As Earnings Season Begins

Stocks opened the week higher but stalled mid-week and closed mixed to lower after sellers showed up in the latter half of the week. Several important areas of the market, that had been leading for months, are now in “pullback mode” as we enter the heart of earnings season. Some of the recent leading areas such as: Defensive stocks, Consumer Staples, Food, Beverage and Utility stocks began pulling back last week after a healthy rally. We are also watching Gold and Gold stocks (another leading area) which stalled on Wednesday and are now pulling back to digest their latest rally. Transports (IYT), Financials (XLF), and a slew of energy stocks remain strong (XLE, XOP, OIH) which continues to bode well for the market. That is the positive sector rotation we are continuing to see beneath the surface. Since earnings season began, the big winners have been financials, a few transportation and commodity stocks. Meanwhile, the big loser has been big tech (GOOG, NFLX, ILMN, V, SBUX, MSFT, just to name a few). Technically, the market is pausing just below record highs which is perfectly normal after a big move. Next week we have another Fed meeting (yippee) and several hundred earnings reports. We want to analyze the health of this pullback to see if it is healthy or the beginning of something worse. Since Feb’s low, the S&P 500 has defended its short term 21 day moving average (just below 2070) almost perfectly. That is the first level of support we are watching. If that level breaks, then watch for the 50 and 200 DMA lines near 2012-2015.
Monday-Wednesday’s Action: Stocks Edge Higher As Crude Hits Fresh 2016 High
Stocks rallied on Monday, led by a huge positive reversal in crude oil, after oil producers decided not to freeze production on Sunday. A slew of energy stocks surged on the news. Earnings news was mixed. Morgan Stanley ($MS) fell after reporting a lousy quarter. Elsewhere, Hasbro (HAS) enjoyed a huge breakaway gap after the company reported numbers. The toy maker enjoyed a healthy quarter largely due to strong sales from Disney’s toys ($DIS). Disney also rallied nicely and jumped to a three month high after being upgraded.
On Tuesday, the market opened higher but sold off shortly after the open as a lot of money piled into commodity stocks as the US dollar fell. Crude oil broke out of its latest base and hit a fresh multi-month high. Silver soared over 4% and also vaulted to a fresh multi-month high. Netflix (NFLX), Illumina (ILMN) and International Business Machines Corp (IBM) all gapped down after reporting earnings. Goldman Sachs (GS) rallied even though they reported a big drop in earnings. Economic data failed to impress. Housing starts fell -8.8% to 1.089M, missing estimates for 1.167M.
Stocks rallied on Wednesday after crude oil broke out and hit a fresh high for 2016. This helped a slew of commodity stocks rally which lifted the broader indices. Earnings data was mixed. Shares of Yahoo (YHOO) and United Healthy (UNH) rallied after reporting numbers but others fell. Economic was relatively light. Existing home sales beat estimates in March, rising +5.1% to a 5.330 million annualized rate. Existing home sales fell -7.3% in February and the year-on-year rate was only +1.5% which is still weak. Gold, and a slew of gold stocks, reversed and closed lower which could be a sign of near term fatigue.
Thursday-Friday’s Action: Earnings Roulette Continues
Stocks fell on Thursday after the European Central Bank (ECB) held their latest meeting and several stronger than expected economic data was released in the U.S. The U.S. dollar rallied hard which put pressure on a slew of commodities and commodity stocks. Stocks were relatively quiet on Friday as investors digested the latest round of earnings data and the Bank of Japan (BOJ) hinted at more easy money. Shares of Alphabet Inc. (GOOG and GOOGL), Visa (V), Microsoft (MSFT), and Starbucks (SBUX) were some of the big cap stocks to fall after reporting earnings. Meanwhile, shares of Norfolk Southern Corp (NSC), Core Laboratories (CLB). and BJ’s Restaurant’s Inc (BJRI) were some of the stocks to rally after reporting earnings.

Market Outlook: Easy Money Back In Play
Stocks are pulling back as the S&P 500 flirts with its short term 10 day moving average. Economic and earnings data remains less than stellar but all that matters now- is easy money from global central banks. As always, keep your losses small and never argue with the tape.