Daily Market Commentary

Quiet Day On Wall Street

17 Feb

Thursday, February 17, 2011
Stock Market Commentary:
Stocks were quiet on Thursday after jobless claims rose more than expected last week and the consumer price index (CPI), which is used to measure inflation, continued to rise last month. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages continue marching higher. The fact that the major averages bounced back sharply after a very brief pullback in January illustrates how strong this 25-week rally actually is.

Jobless Claims, Inflation, Leading Indicators, & Philly Fed Survey Are Released:

Before Wednesday’s open, the Labor Department said initial jobless claims rose by 25,000 to 410,000 last week which topped the Street’s estimate for a gain of 17,000. The Labor Department also released the seasonally adjusted consumer price index which rose by +0.4% last month from December. On a year-over-year basis, prices swelled 1.6% before seasonal adjustments compared to the same period in 2010. However, core inflation, which removes food and energy prices and is considered the Fed’s preferred measure of inflation, increased by +0.2%. The report also showed that the annual underlying inflation rate stood at 1.0% in January which is still under the Fed’s target for 2.0%. At 10AM EST, leading economic indicators showed the economy continued to grow and the Philly Fed survey surged to 35.9, easily topping expectations.

Market Action- Confirmed Rally; Week 25

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

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15 Jan
Blog

The World Is Deflating…

I Feel Deflated

Deflation, What Is It? & Why Is It Important?

Deflation, Inflation & Disinflation- Defined

For the purposes of this article, the following definitions will be used:

  • Deflation occurs when asset prices fall considerably
  • Inflation occurs when asset prices increase
  • Disinflation occurs when the rate of inflation slows.

The World Is Deflating:

As a general guideline, economists and central bankers around the developed world want to see a rate of inflation around 2%. That is ideal and considered healthy in most developed economies. As of this writing (Jan 2015), the world is deflating, not inflating and that is not a healthy sign for Wall Street & Main Street.

Why Is Deflation Bad; The Deflationary Spiral

FindLeadingStocks.com members frequently ask me why is deflation bad? I am asked:
Isn’t it better if I pay less for food and energy? Why is it bad to see prices fall? So on and so forth…

“Deflation Begets More Deflation” – Adam Sarhan

In the short term, deflation may appear “good” for your wallet but if it persists, the ramifications are ominous. The primary reason is that deflation begets more deflation and pretty soon it morphs into a negative deflationary spiral that could cripple the general economy. Broad scale deflation is bad for the economy because the primary reason why deflation occurs is due to waning demand, which occurs when people spending less money. That, in turn, reduces money supply and credit and hurts the economy, earnings, incomes, and general economic growth. To sell their products, companies are “forced” to lower prices and that tends to lower earnings. In time, salaries are reduced, and people have less money to spend. All this causes more deflation which sparks a negative deflationary spiral.

Right Now, Deflation Is A Bigger Threat Than Inflation

Over the 12 months we have seen deflation spike as a slew of widely used asset prices are imploding. Right now, Metals (Gold, Silver, Copper), Energy (Crude Oil, Gasoline, Nat Gas), and Agriculture commodities (Soybeans, Corn, Wheat) are all in private bear markets and the prices are accelerating to the downside. This is not healthy action and something investors across the globe are watching closely. In the last six months, a lot of attention has been paid to imploding energy prices. The concern going forward is that eventually stock prices will be dragged lower if “deflation” continues or gets worse. This is something that central banks across the globe are watching closely and we are doing the same thing. Stay tuned, it is never a dull moment on Wall Street.

26 Apr
Daily Market Commentary

Stocks Rally Ahead of GDP Data

Please Note: After Nearly 10 Years of writing our daily stock market commentary, due to time constraints, this will become a weekly note-
Starting May 1, 2012.
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SP 500 Back In A Confirmed Uptrend

SP 500 Back In A Confirmed Uptrend


Thursday, April 26, 2012
Stock Market Commentary:
Stocks and a slew of other “risk assets” rallied on Thursday as investors shrugged at the latest round of mixed to weaker than expected economic and earnings data. 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.
Jobless Claims Are Still High:
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.
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!
 

19 Apr
Daily Market Commentary

Stocks Fall On A Slew of Earnings & Economic News

SPX- Flirting With Its 50 DMA line

SPX- Flirting With Its 50 DMA line

Thursday, April 19, 2012
Stock Market Commentary:

Stocks and other risk assets were mostly lower on Thursday as investors digested a slew of earnings and economic data. As earnings continue 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. The Dow Jones Industrial Average and S&P 500 broke below their respective 50 DMA lines on Thursday which is not ideal for the bulls.

Spanish Debt Auction Solid But Yields Rise, Brazil’s Central Ban Cuts Rates, & A Slew of Earnings Released:

Stocks fell on Thursday as investors digested a slew of economic and earnings data. Demand for Spain’s much anticipated auction was solid but yields were mixed. Spain sold 2.5 billion euro ($3.3 billion) of 2-and 10-year sovereign bonds but yields rose on the 10-year debt to 5.743%, and fell on the 2-year debt to 3.463%. In other news, Brazil’s central bank cut interest rates by 75 basis points to 9% and left the door open for more rate cuts in an attempt to stimulate their economy. A slew of high profile companies released Q1 earnings and most topped estimates. However, news from the economic front was not impressive. Weekly jobless claims rose for the second straight week and missed the Street’s estimate. Existing home sales fell -2.6% for March and missed the Street’s estimate. The Philly Fed Index came in at 8.5 in April which was lower than March’s 12.5 reading and the 10.3 estimate. Meanwhile, the Conference Board’s Index of Leading Indicators rose +0.3% which topped the average estimate for a gain of +0.2%.

Market Outlook- In A Correction

From our point of view, the market is still digesting its strong move in Q1 of 2011. The major averages are currently struggling with their respective 50 DMA lines as investors digest a slew of earnings and economic data. 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!

Please Note:
Due to time constraints, this commentary will become a weekly note starting May 1, 2012.  
We would like to thank you for your continued support and patronage!

27 Mar
Daily Market Commentary

Quiet Day On Wall Street

Russell 2k Breaks Out Of An Inverse Head and Shoulds Pattern

Russell 2k Breaks Out Of An Inverse Head and Shoulds Pattern

Tuesday, March 27, 2012
Stock Market Commentary:

Stocks and other risk assets were mixed on Tuesday after the latest round of mixed economic data was released. 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. Since then, stocks have been enjoying a very strong uptrend. The benchmark S&P 500 paused near its 2011 high (~1370) before moving higher and that level should now become support. The next level of support would be the 50 DMA line, then a deeper 5-9% pullback. It is important to note that the bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line.

Economic Data Mixed:

Stocks ended lower on Tuesday as investors digested the latest round of mixed economic data. The S&P Case/Shiller index was unchanged which beat the -0.2% decline the Street had expected. The report showed that prices for single-family homes were unchanged in January which bodes well for the ongoing recovery in the housing market. On a non-seasonally adjusted basis, prices fell by -0.8%. A separate report showed that consumer confidence in the U.S. fell in March to 70.2, from an upwardly revised 71.6 in February. This just missed the Street’s 70.3 expectation.

Market Outlook- Confirmed Rally

After a brief pullback most risk assets (mainly stocks and a slew of commodities) are back in “rally-mode” evidenced by the strong rally we have seen in recent days. This shallow pullback is considered healthy and shows how strong the bulls are at this point. However, if sellers show up and support is breached then the bears will have regained control of this market. 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!
Coming Up This Week:
TUESDAY: S&P Case-Shiller home price index, consumer confidence, 2-yr note auction, Fed’s Rosengren speaks; Earnings from Lennar, Walgreen
WEDNESDAY: Weekly mortgage apps, durable goods orders, oil inventories, 5-yr note auction, Fed’s Bullard speaks, FDA discusses obesity drugs
THURSDAY: GDP, jobless claims, corporate profits, Fed’s Plosser speaks, 7-yr note auction, farm prices, Fed’s Lacker speaks; Earnings from Best Buy, Research In Motion
FRIDAY: Personal income & outlays, Chicago PMI, consumer sentiment, Stringer’s last day as Sony CEO
Source: CNBC.com
 

21 Mar
Daily Market Commentary

Quiet Day On Wall Street

RUT- Inverse Head and Shoulders Pattern

RUT- Inverse Head and Shoulders Pattern

Wednesday, March 21, 2012
Stock Market Commentary:

Stocks and other risk assets were bid up late Tuesday after Bernanke said he would take additional steps if another shock hit the global economy. As we have been mentioning for weeks, the market is extended to the upside and we would not be surprised to see a nice pullback to shake out the weak/late hands. 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. Since then, stocks have been enjoying a very strong uptrend. The benchmark S&P 500 paused near its 2011 high (~1370) before moving higher. At this point, it would be perfectly normal and healthy to see a 5-9% pullback at any point to give the bulls a chance to consolidate the recent gain. That would bring the S&P 500 down to 1320-1280. It is important to note that the bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line.

Bernanke Testifies & Economic Data Mixed:

Futures were higher on Wednesday after Ben Bernanke said that he would take additional steps to stimulate the economy if conditions worsened. The Mortgage Bankers Association said weekly mortgage applications fell last week due to a drop in refinancing demand. The National Association of Realtors said home sales slid -0.9% in February to a seasonally adjusted annual rate of 4.59 million and revised January’s reading to 4.63 million. That was the highest level since May 2010.  Equally important, housing stocks continue to act well.

Market Outlook- Confirmed Rally

Risk assets have begun pulling back which at this point is considered normal. The key going forward is to gauge the health of the pullback and see if the bulls are able to defend logical areas of support (recent chart lows and important moving averages). So far this action is considered healthy for the risk on trade. However, if sellers show up and support is breached then the bears will have regained control of this market (still a long ways off). 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!
 

22 Feb
Daily Market Commentary

Quiet Day On Wall Street

Housing ETF Pulling Back to 50 DMA Line

Housing ETF Pulling Back to 50 DMA Line

Wednesday, February 22, 2012
Stock Market Commentary:

Stocks and a slew of other risk assets were flat to relatively lower on Wednesday after the enthusiasm wore off regarding the second bailout for Greece and China’s manufacturing sector contracted for the fourth consecutive month. The primary catalysts for the risk on trade was the ECB relief long term loan package in December 2011 and the continued strength in the U.S. (and by extension the global) economy in recent weeks. 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.

China’s Manufacturing Sector Improved But Still Contracting & Greece Woes Flare Up Again:

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. The European Central Bank said that it wants local governments to begin taking responsibility for shoring up their country’s finances.

U.S. Housing Market Remains In Flux: Housing Stocks Pulling Back To Consolidate Recent Move

In the U.S. the Mortgage Bankers Association said mortgage applications slid by a seasonally adjusted -4.5% in the week ending February 17, 2012. The report factors in both new purchases and refinances. Existing home sales swelled by +4.3% last month to a 4.570 million annual rate. The median home price tanked by -4.6% to $154,700. This decline suggests the housing market has yet to bottom and the decline is confirmed by a 4.0% decline for the average price to $201,200. Year-on-year rates also show a small single digit contraction.

Market Outlook- Confirmed Rally

Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. 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!
 

05 Apr
Daily Market Commentary

Quiet Day On Wall Street

Tuesday, April 5, 2011
Stock Market Commentary:

Stocks were traded between positive and negative territory on Tuesday after Portugal’s debt rating was cut and China took its latest step in curbing its red-hot economy. It was encouraging to see a slew of leading stocks and the benchmark S&P 500, Dow Jones Industrial Average, Nasdaq composite, and small cap Russell 2000 index all close and stay above their respective 50 DMA lines in late March. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. However, the correction was short lived when a new rally was confirmed on Thursday March 24, 2011′s healthy action. Since then, the action remains healthy which suggests the bulls are back in control of this market.

China, Portugal, and Fed Minutes

Before Tuesday’s open, China raised its reserve requirement in its latest attempt to curb inflation and its red-hot economy. Elsewhere, Portugal’s debt rating was cut which put downward pressure on the euro. In the U.S., the Federal Reserve released the minutes of its latest meeting which largely reiterated their recent stance that the economy continues to improve, albeit slowly. Fed Chairman Ben Bernanke, said policy makers must watch inflation “extremely closely.” Keep in mind that the Fed’s mandate is twofold: curb inflation and maintain steady economic growth. That said, the recent surge in food and energy prices (i.e. soaring commodity prices) is putting mild pressure on the Fed to raise rates in the foreseeable future.

Market Action-Confirmed Uptrend

The market is back in a confirmed uptrend after a modest (and healthy) -6% correction from its post-recovery highs. We find it very bullish to see the mid cap S&P 400 index hit a fresh all time high and the small cap Russell 2000 index flirt with its all time high. in addition, the Dow Jones Industrial Average vaulted to a fresh post-recovery high and the S&P 500 and Nasdaq composite are just shy of fresh 2011 highs! Finally, we are very happy to see a slew of high ranked stocks trigger fresh technical buy signals in recent weeks which suggests higher, not lower prices lie ahead. If you are looking for specific help navigating this market, please contact us for more information.

 

22 Mar
Daily Market Commentary

Quiet Day On Wall Street

Tuesday, March 22, 2011
Stock Market Commentary:

On Tuesday, stocks were quiet as investors digested a rather volatile trading week. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. The current crisis in the Middle East remains in flux which is putting upward pressure on oil and gold and downward pressure on equities. The benchmark S&P 500 was up nearly 100% from its March 2009 low before its latest correction and is still about -17% off its all-time high from October 2007.

50 Day Moving Average line Is Resistance & Home Prices Continue to Fall:

Stocks were quiet on Tuesday as the benchmark S&P 500 and tech-heavy Nasdaq composite remain below their respective 50 DMA lines. It is important to note that since the summer 2010 low, the 50 DMA line has served as formidable support for the major averages and is currently acting as resistance. Therefore, the first important step needed for this market to move into fresh new high territory is for the major averages (and leading stocks) to repair this important level. Until then, the 50 DMA line will serve as resistance. Elsewhere, the Federal Housing Finance Agency (FHFA) said its Home Price Inde (HPI) fell -0.3% in January which is the latest in a series of weaker-than-expected data from the ailing housing market.

Market Action- Market In A Correction; 28-Week Rally Ends

All the major averages sliced below their respective 50 DMA lines on Thursday, March 10, 2011.  Thursday, March 17, 2011 marked day 1 of a new rally attempt which means that the earliest a possible follow-through day (FTD) could emerge would be Tuesday, as long as Thursday’s lows are not breached. That said, the window is now open for a new FTD  to emerge which will confirm the current rally attempt. However, if Thursday’s lows are breached, then the day count will be reset and odds will favor lower prices, not higher, will follow. It is important to note that the recent ominous action reiterates the importance of raising cash and playing strong defense until a new FTD emerges. If you are looking for specific help navigating this market, please contact us for more information.

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28 Feb
Daily Market Commentary

27-Week Rally Continues!

Monday, February 28, 2011
Stock Market Commentary:
Stocks rallied on Monday after finding support near their respective 50 DMA lines last week. The current crisis in the Middle East remains in flux which is putting upward pressure on gold and oil. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages bounced after finding support near their respective 50 DMA lines in late February.

Consumer Spending, Personal Income Rise; Pending Home Sales Fall:

Consumer spending in the U.S. rose but fell short of estimates last month due to higher food and energy prices. The Commerce Department said purchases rose +0.2% which was the smallest gain since June and half the median forecast. The report also showed that personal income topped estimates which was largely due to a stronger economy and the recent tax-cut extension. Inflation remained at bay and below the Federal Reserve’s 2% target. Elsewhere, a separate report showed U.S. pending home sales fall -2.8% in January to 88.9. The pending home sales index fell -1.5% compared to the same level last year.

Market Action- Rally Under Pressure; Week 27 Begins

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November, January, and late February. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks were a bit extended in recent months and this pullback (back to the 50 DMA lines) is very healthy as it shakes out the weaker hands and restores the the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

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27 Jan
Daily Market Commentary

Quiet Day On Wall Street

Thursday, January 27, 2011
Stock Market Commentary:

The major averages traded in a narrow range on Thursday as stronger pending home sales helped offset weaker durable goods and jobless data. The benchmark S&P 500 index managed to hit a new recovery high which took pressure off this current (and robust) 22-week rally. The fact that the bulls showed up and quickly quelled the bearish pressure suggests this rally has more room to go.

Jobless Claims & Durable Goods Miss; Pending Home Sales Beat:

Before Thursday’s open, Standard and Poor’s downgraded Japan’s credit rating to AA- from AA, amid growing debt woes. Japan, the world’s third-largest economy in the world after the United States and China, was downgraded by the Japanese government’s already high debt burden was likely to continue to rise and would only peak during the middle of next decade. In the U.S., weekly jobless claims rose by +51,000 to 454,000 last week which easily topped estimates. Heavy snow in the north east was blamed for the uptick in jobless claims. Elsewhere, durable goods fell -2.5% in December largely due to weakness in aircraft orders. At 10am EST, the National Association of Realtors said pending home sales rose 2% to 93.7 for a fifth consecutive monthly gain. The initial read on Q4 GDP is slated to be released before Friday’s open.

Market Action- Market In Confirmed Rally; Week 22

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines as this market proves resilient and simply refuses to go down. The market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

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20 Oct
Video

Emerging Inflation to Squeeze West

Airtime: Wed. Oct. 20 2010 | 2:00 AM ET
Inflation in emerging markets is a major issue for Western companies as input prices are set to rise because of it, Philippa Malmgren, president of Principalis Asset Management, told CNBC Wednesday.