Daily Market Commentary

Another Positive Week On Wall Street

27 Apr

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Starting May 1, 2012.
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Confirmed Uptrend

Confirmed Uptrend

Friday, April 27, 2012
Stock Market Commentary:

Stocks and a slew of other “risk assets” were quiet on Friday after Spain was downgraded by S&P and the first reading on Q1 U.S. GDP was announced. As earnings and economic data continues to be released in droves, it is paramount that we not only pay attention to the actual numbers but how the stocks (and major averages) react to the numbers. This allows us to see how the market participants are “voting” and helps us filter out the noise and focus on what matters most: price action. We find it encouraging to see all the major averages jump back above their respective 50 DMA lines in the wake of Apple’s blow-out quarter.

Monday-Wednesday’s Action: Apple’s Earnings Smash Estimates!

Stocks and a slew of risk assets fell on Monday after a slew of economic and political data questioned the health of the global recovery. Overnight, China said its manufacturing sector contrcated for the sixth consecutive month which is not ideal. Germany’s manufacturing index also contracted which was also a surpise. Spain’s economy contracted in Q1 for the first time several years. The Dutch cabinet resigned after failing to pass much needed austerity measures. In the first round of presidential elections, French voters were mixed but largely expressed a negative view for the Sarkozy administration. According to CNBC.com, this was the first time an incumbent French president came second in the first-round vote in the present electoral system’s 54-year history. The second round will be held in two weeks. This bodes poorly for the political capital behind the current EU bailout plan. Especially, if citizens of other countries in the E.U. do not want austerity, the ramificaitons could be deleterious.
Stocks rallied on Tuesday even after the latest housing data was not ideal. The S&P Case-Shiller index, which measures home prices in 20 metropolitan areas around the country, fell for a sixth straight month. A separate report showed that new home sales plunged -7.1% which was the largest drop in almost a year and is not ideal for the ailing housing market, the jobs market, or the broader economy. The Conference Board said its consumer confidence index fell which is not ideal.
Stocks and a slew of risk assets opened higher on Wednesday as investors looked passed a disappointing durable goods number and focused on a much stronger-than-expected earnings report from Apple Inc. (AAPL). The Commerce Department said total durable goods orders fell by -4.2% during March which missed the Street’s estimate for a decline of -1.7%. Excluding transportation items, durable goods orders fell by -1.1%, which still missed the Street’s estimates for a gain of +0.5%. The Fed concluded its two-day meeting, held rates steady, and largely reiterated their recent data-dependent stance regarding future policy. For months, the U.S. Fed has taken a “wait-and-see” approach for handling policy and whether or not to initiate another round of QE (i.e. stimulus).

Thursday & Friday’s Action: Stocks Are Resilient

Stocks and a slew of risk assets rallied on Thursday as they digested Wednesday’s strong move and the latest round of mixed to weaker-than-expected economic and earnings data. Before Thursday’s open, the Labor Department said weekly jobless claims slid by 1,000 to a seasonally adjusted 388,000. However, the closely watched four-week moving average rose by 6,250 to 381,750 which was the highest reading since January and topped the Street’s estimate for 375,000. Separately, pending home sales rose +4.1% to 101.4 which topped the Street’s estimate for 96.  A slew of earnings were released and were mixed to slightly lower. After Thursday’s close, S&P downgraded Spain’s rating by two notches but Spain’s primary stock market and the euro both rallied. When a market doesn’t fall on negative news, it is usually a subtle sign of strength. Stocks were quiet on Friday after the U.S. said Q1 GDP grew by +2.2% which missed the Street’s expectation.
Market Outlook- Confirmed Uptrend
From our point of view, the market back in a confirmed uptrend as the bulls appear to have regained control of this market. The major averages are back above their respective 50 DMA lines and short term downward trendlines (shown above) which is very healthy. 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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Newer Adam Sarhan WSJ Quote: US Stocks Rise, Driven By Consumer Stocks
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Older Stocks Rally Ahead of GDP Data

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17 Aug
Daily Market Commentary

Another Positive Week On Wall Street

Long-Term Look At The US Stock Market

Friday, August 17, 2012
Stock Market Commentary:

The benchmark S&P 500 index has rallied in 9 of the past 11 weeks which shows how strong this market actually is. The underlying notion that has helped stocks rally has been further easing from global central banks. Some market participants are hoping that the tepid economic and earnings data we have seen recently will force at least one of the prominent central bank’s hand into another round of easing in the near future.

Monday-Wednesday’s Action- Stocks Edge Higher:

Stocks ended mixed on Monday but continued trading in a relatively tight trading range as this market continues to coast through the final weeks of summer. The standout winner for us on Monday was Google (GOOG- which we own for full disclosure). The stock rallied nearly +3% on Monday after announcing plans to cut 4,000 jobs from its Motorola Mobility business and said it will acquire Frommer’s from publisher John Wiley & Sons (JWA). This sent shares of Yelp (YELP) and TripAdvisor (TRIP) lower -7.7% and 4.5% respectively on the news. In other news, the volatility index, or the VIX,  fell to levels not seen since June of 2007! For what its worth, that was four months before the market topped out in 2007 and we all know what happened in 2008.
Stocks opened higher but ended flat on Tuesday after the latest economic data from the US and Europe was mixed to slightly better than expected. US retail sales swelled by +0.8% in July which topped the Street’s forecast for a gain of +0.2%. Excluding autos, retail sales increased by +0.8% which also topped the Street’s expectation for a gain of 0.3%. Overall producer prices rose by +0.3% in July which barely beat the Street’s estimate for a gain of +0.2%. The report showed that core producer prices increased by +0.4% which was higher than the +0.2% consensus. GDP in the eurozone fell slightly in the third quarter however the “big” miss that everyone was expecting did not occur. Wednesday was another flat, light volume, tight trading range day on Wall Street as the summer doldrums remain in full gear. Economic data was in-line to slightly better than expected. Inflation pressures remained at bay evidenced by an unchanged reading in the consumer price index. This missed the Street’s expectation for a gain of +0.2%. Core prices, which exclude food and energy, also missed estimates with a gain of +0.1%.

Thursday & Friday’s Action: Merkel Sparks Broad Risk-on Rally

Stocks rallied on Thursday after German Chancellor Angela Merkel backed the European Central Bank’s efforts to combat the euro zone debt crisis. Merkel publicly supported ECB president Mario Draghi’s comments that the ECB will do whatever it takes to defend the euro. Merkel made it clear that his comments echoed views of other European leaders. News on the economic front was mixed. The Philly Fed survey fell for the fourth consecutive month while weekly jobless claims rose to a seasonally adjusted 366,000, matching expectations. The Commerce Department said housing starts unexpectedly fell last month to a seasonally adjusted annual rate of 746,000 units. The report also lowered June’s initial reading which is not ideal. Stocks on Friday were quiet as investors digested the latest round of economic data. US consumer confidence jumped to its highest level since May which bodes well for the broader economy. The Conference Board said leading indicators rose +0.4% in July to 95.8 which topped the Street’s estimate for a gain of 0.2%.

Market Outlook- Confirmed Rally

From our point of view, the market is in a confirmed rally which means the path of least resistance remains higher. It is encouraging to see all the major averages trade back near their 2012 highs! 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!
24 Feb
Daily Market Commentary

Another Positive Week On Wall Street!

SPX- Strong Uptrend Continues

SPX- Strong Uptrend Continues

Friday, February 24, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets ended higher during this shortened holiday week as investors digested a second Greek bailout and a slew of stronger than expected economic and earnings data from the U.S. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 has done a great job staying above its Q4 2011 high (~1292) and is now doing its best to stay above 1356 which corresponds with July’s high. The next level of resistance is 2011’s high just above 1370. The bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line. Leadership continues to improve which is another healthy sign

Monday-Wednesday’s Action:

The stock market in U.S. was closed on Monday in observance of the President’s Day holiday. However, U.S. futures, and oversea’s markets enjoyed nice gains on Monday on renewed optimism vis-a-vis the latest bailout for Greece. On Tuesday, the Dow Jones Industrial Average topped 13,000 for the first time since May 2008. The DJIA has been up every month since October and is currently enjoying one of its strongest rallies since the March 2009 low! Meanwhile, the tech-heavy Nasdaq composite has already taken out its 2007 high and is currently sitting at its highest level since December 2000! Make no mistake about it, the bulls are clearly in control of this market as the global economy continues to recover from the Great Recession in 2008 and 2009. In the short term, stocks are very extended to the upside and a 5-9% pullback would be considered “normal” and “healthy” for this very strong bull market. Until then, one would be wise to not fight this very strong tape!
Stocks opened lower on Wednesday after China said its manufacturing sector slid for the fourth consecutive month. The HSBC purchasing managers index (PMI) rose to a four month high at 49.7 but still remained below the critical boom/bust line of 50. The PMI is used as an early indicator for China’s industrial activity and was hurt due to sagging exports to Europe. Elsewhere, the European Central Bank said that it wants local governments to begin taking responsibility for shoring up their country’s finances.

Thursday & Friday’s Action: Stagflation in Europe Weighs On Markets, U.S. Economic Data Tops Estimates

Before Thursday’s open, a report was released that forecasts the 27-nations in the European Union, which are responsible for a fifth of the global economy, to experience stagflation in 2012. Stagflation is a situation in which one’s economy is stagnate, if not contracts, coupled with high unemployment and higher inflation. The report expects the euro-zone to fall into a recession in 2012 which would be the first time the EU was in a recession since the Great recession in 2009. Economic data in the U.S. continued to be positive. The Labor Department said weekly jobless claims were unchanged at 351,000 which beat the Street’s estimate for a slight gain to 354,000. Needless to say, this bodes well for both the U.S. and global economy. Stocks reacted favorably on Friday after U.S. consumer confidence easily topped estimates. Meanwhile, the Commerce Department said new home sales fell by -0.9% in January to a seasonally adjusted 321,000-unit annual rate. The report topped estimates for an annual rate of 315,000.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December and are extended by any normal measure. All this means is that the odds for a pullback increase. However, markets can very easily go from overbought to extremely overbought. 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!