Daily Market Commentary

Stocks Edge Higher On Mixed Volume

10 Dec

Thursday 12.10.09

Market Commentary:

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

Economic Data:

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

Timothy Geithner on Capital Hill:

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

Afternoon Weakness:

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

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16 Jun
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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

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

A Tight Bullish Pattern Is Forming On Wall Street

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

Mon-Wed Action:

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

Thur & Fri Action:

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

Market Outlook: Strong Action Continues

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