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

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

02 Jun
Daily Market Commentary

Week-In-Review: Another Record Setting Week On Wall Street

Another Record Setting Week On Wall Street

The major averages remain exceptionally strong as the market simply refuses to decline in any significant fashion. Comey is set to testify next week and that is the next big wild card for the market. 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. 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 a short, intermediate, and long 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:

Stocks were closed on Monday in observance of Memorial Day. Stocks were quiet to slightly lower on Tuesday as the tech-heavy Nasdaq composite snapped a 7 day win streak. Personal income rose 0.4% in April, which matched expectations, and consumer spending rose by 0.4%. The personal consumption expenditures price index, which is what the Federal Reserve likes to look at to measure of inflation, rose 0.2%. Wednesday was another very quiet day on Wall Street as May officially came to an end. Economic data was mixed. Pending home sales fell -1.3% in April, missing estimates for a +0.5% gain. Chicago PMI came in at 59.4, beating estimates for 57.5. Separately, The Federal Reserve released its Beige Book which showed waning optimism in several of the Fed’s 12 districts. The report said consumer spending is softening in many districts and the economy may be “flattening out.”

Thur & Fri Action:

Stocks jumped nicely on Thursday helping the S&P 500 and the Nasdaq composite hit fresh record highs. Before Thursday’s open, ADP, the country’s largest private payrolls company said private employers added 253,000 new jobs last month which easily beat the Street’s estimate for 170,000. In the afternoon, President Trump said he is pulling out of the Paris Climate Agreement and wants to renegotiate. Stocks rallied on Friday after the Labor Department said U.S. employers added 138,000 jobs in May which missed estimates of 185,000. Meanwhile, the unemployment rate fell to 4.3%, down from 4.4% and that was the lowest level since 2001.

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

26 May
Daily Market Commentary

Week-In-Review: Another Strong Week On Wall Street Ahead Of The Long Weekend

Another Strong Week On Wall Street Ahead Of The Long Weekend

The bulls showed up and sent stocks soaring last week helping the S&P 500, Nasdaq composite and Nasdaq 100 hit fresh record highs. The month ends next week and the end of the month typically, but not always, has a slightly upward bias. One of the hallmarks of a bull market is to see the market brush off nearly all negative news and race higher. Since the election, that is exactly what is happening. The market had every chance in the world to fall after the big sell-off on Wednesday 5/17/17. Instead of falling, the bulls showed up and quelled the bearish action and sent stocks racing higher. Once again, the sell-off was very short in nature which just reiterates how strong this aging bull market is right now. In the short term, May’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. 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 a short, intermediate, and long 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:

Stocks rallied on Monday as President Trump secured big contracts from Saudi Arabia and other countries on his trip. A slew of defense stocks soared after the deal was announced. Shares of, Blackstone, also soared after the company announced the creation of a $40 billion infrastructure investment fund with Saudi Arabia’s Public Investment Fund, the country’s main sovereign wealth fund. Stocks rallied on Tuesday after the White House released its budget. The proposed 2018 budget, will likely change before it is approved, aims to cut federal spending by $3.6 trillion over the next 10 years. Stocks edged higher on Wednesday after the minutes of the Federal Reserve’s last meeting were released. The Fed plans to slowly reduce its massive $4.5 trillion balance sheet. The central bank wants to do it slowly and delicately. The Fed will announce cap limits on how much it will allow to roll off each month without reinvesting. To help ensure market stability, the Fed said it plans to reinvest any repayments that exceed the pre-determined cap. Separately, Moody’s downgraded China’s debt. A few hours later, China responded by adjusting its currency and that helped stocks rally on Thursday.

Thur & Fri Action:

The S&P 500 and Nasdaq composite both vaulted to fresh record highs on Thursday as a slew of big cap tech stocks soared to fresh record highs. Shares of Amazon (AMZN), hit $999/share and are currently flirting with $1,000/share. Separately, oil prices plunged -5% after OPEC agreed to extend the production cuts until March 2018. Elsewhere, jobless claims hit 234,000, which was slightly higher than the prior week’s reading but remained near the lowest levels in 40 years. Stocks were relatively quiet on Friday after the government revised Q1 2017 GDP up to 1.2%. Meanwhile, Durable Goods fell -0.7%, missing estimates for a decline of -1.0%. 

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

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

28 Apr
Daily Market Commentary

Week-In-Review: Stocks Surge In Last Week of April

Stocks Surge In Final Week Of April

Stocks surged last week on a trifecta of positive news. First, the French Election came back with a market-friendly outcome. Second, President Trump announced his much-awaited Tax plan. Finally, the long earnings recession is over.  Technically, the bulls showed up and defended major support for the indices and sent stocks soaring back above their respective 50 day moving average lines and other important areas of resistance. On a relative basis, the Nasdaq and Nasdaq 100 continue to out-perform the other popular indices with the Nasdaq topping 6,000 for the first time ever. In the short term the market went from being over sold to a little extended to the upside but nothing too crazy. The bulls are in clear control until we see support taken out on a closing basis.

Mon-Wed Action:

Stocks surged on Monday after the French Election came back with a market friendly outcome. Emmanuel Macron beat the front runner, Marine Le Pen, and the pair will face off again on May 7. So far, most polls show Macron easily beating Le Pen in the second round. Stocks soared on Tuesday helping the tech-heavy Nasdaq Composite jump above 6,000 for the first time ever! It’s important to note that approximately 40% of the Nasdaq 100 are made up of only 5 stocks: Amazon, Facebook, Netflix, Alphabet and Apple. If we see selling in those stocks, the Nasdaq and Nasdaq 100 could be in trouble.  Stocks were quiet on Wednesday after President Trump unveiled his tax plan. Stocks opened higher but closed lower on Wednesday after the White House released its tax plan and President Trump said he wants to renegotiate NAFTA. 

Thur & Fri Action:

Stocks were relatively quiet on Thursday as the world waited for a slew of big cap tech stocks to announce earnings after the bell and for GDP to be released before Friday’s open. After the bell a slew of stocks including: Alphabet, Microsoft, Amazon, and Intel, just to name a few reported earnings and most of them did well. Before Friday’s open, the government said GDP only grew by 0.7% which was the slowest reading in three years. Stocks were quiet as the market pauses to digest a very strong rally.

Market Outlook: Bulls In Control

The bulls are back in control after a nice 8-week pullback. 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

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