Daily Market Commentary

Strong Week on Wall Street

26 Apr

SPX- Bulls defend upward trendline and 50 dma line 4.29.13Stock Market Commentary:
Friday, April 26, 2013

We changed the status from rally under pressure to confirmed rally in our Tuesday 4/23/13 update and noted that the bulls are back in control of this market. So far, every pullback this year has been very small in both size (% decline) and scope (days, not weeks). As long as this healthy action continues we shall continue to err on the long side. As we have noted before the market bent but didn’t break…yet.

Monday-Wednesday’s Action: Bulls in Control

Last weekend, the G-20 did not denounce Japan’s massive trillion dollar stimulus plan which sent the Nikkei higher and the yen lower. European stocks rallied after Italy’s President Giorgio Napolitano was elected for a second term which helped allay further political concerns in the troubled continent. U.S. stocks rallied on Monday after Caterpillar (CAT) lowered guidance and existing home sales missed estimates. Existing home sales fell to 4.92M in March, down -0.6% according to the National Association of Realtors. 
 
Stocks rallied on Tuesday as a slew of weaker-than-expected economic data was announced across the globe. Overnight, China said its PMI Manufacturing Index fell to 52.0 which missed the Street’s estimate for 54.2. Euro-Area services and factory output fell for a 15th straight month in April. In the US, new home sales rose 1.5% to a seasonally adjusted annual rate of 417,000 units in March. The report showed that there were only 153k new homes on the market in March which was near a record low. Current supply stands at 4.4 months which is below the normal reading of six months.
 
Stocks were relatively quiet on Wednesday as investors digested a slew of economic and earnings data. Germany’s Ifo business confidence index for April slid to 104.4 from 106.7 in March, and missed the Street’s estimate of 106.2. In the US, durable goods orders fell by -5.7% in March which was worse than the Street’s estimate for a decline of -2.9%. Earnings news remains mixed with most stocks in the S&P 500 topping estimates (70% so far) but earnings are on track to fall -1.1% on a year over year basis. If this happens, this will be the first year-over-year decline since 2009.  Apple (AAPL) reported its first quarterly decline in earnings in 10 years. It is very important to note that the market knew this was going to happen as Apple topped out on September 21, 2012 long BEFORE earnings turned south (flat in Q4 and fell in Q1). (I published a special report: Apple & Netflix Case Study: Technicals Lead, Fundamentals Lag- read here. 

Thursday & Friday’s Action: Bulls in Control

Stocks rallied on Thursday after weekly jobless claims slid to 339,000 for the week ending April 20 which was lower than the Street’s estimate for a decline to 351,000. Stocks eased off their highs in the final hour of the session after a report in a German newspaper showed new concern about the euro. Bundesbank President Jens Weidmann sent a letter to Germany’s constitutional court criticizing the European Central Bank’s Outright Monetary Transactions. Before Friday’s open, futures were lower after the initial reading on Q4 GDP missed estimates. The U.S. economy grew at a 2.5% rate in Q1 which missed the Street’s 3.2% estimate.

Market Outlook: Confirmed Rally

It is important to note that the S&P 500 held its 50 DMA line almost to the penny in the middle of April on a closing basis which was a very healthy event. Elsewhere, The Nasdaq Composite, Nasdaq 100, Housing (XHB), Financials (XLF), Transports (IYT), Small (IWM) and Mid caps (MDY) are all back above their respective 50 DMA lines. For those of you that are new to our work, I keep track of the market status differently than other people. My goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae. Looking forward, this market looks strong as long as the benchmark S&P 500 holds above its 50 DMA line. As always, keep your losses small and never argue with the tape.

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15 Jun
Daily Market Commentary

Strong Week On Wall Street

SPX- Breaking Above Neckline

Friday, June 15, 2012
Stock Market Commentary:

Stocks and a slew of other “riskon” assets bounced from deeply oversold levels as hope spread that another round of global monetary easing will curb the economic slowdown across the globe. In early May, all the major averages sliced below their respective 50 DMA lines which prompted us to label this market “in a correction.”  Then in early June the bulls showed up and defend the 200 DMA lines for the major averages. On Friday, the bulls managed send the benchmark S&P 500 index above the neckline of its bullish inverse head and shoulders pattern (shown above). The next level of resistance is the 50 DMA line and then 2012’s highs.

Monday-Wednesday’s Action- Bad News is “Good” News:

Stocks opened higher but closed lower on Monday as enthusiasm waned regarding Spain’s $125 billion bailout. The best headline I came across was one saying, “Spain Got Tarped.” The details of the plan were not ideal and showed EU leaders just throwing more debt at a debt crisis. After the initial and expected at the open on Monday, stocks fell hard and closed near their lows of the day as investors focused on the upcoming elections in Greece and Italy’s onerous debt burden.  
Stocks ended with modest gains on Tuesday but volume, a critical component of institutional activity, was lighter than Monday, as investors looked passed Spain’s woes and focused on hopes that the recent spate of “bad” news will force the Fed’s hand into another round of QE when they meet next week. Cyprus, the third smallest country in the eurozone, sports a tiny population of under 1 million, and its economy only accounts for +0.2% of eurozone GDP asked for a bailout. Yields on Spanish and Italian debt jumped on the news.
The major averages ended lower on Wednesday as sellers showed up and sent stocks lower before the close. The economic data in the U.S. was less than stellar. Retail sales fell -0.2% in May which exceeded the Street’s estimate for a decline of -0.1%.  Elsewhere, producer prices missed estimates, falling -1% in May while core prices met estimates, rising +0.2%.

Thursday & Friday’s Action- Fed, ECB, Someone Save Us:

Stocks enjoyed nice gains on Thursday after global Central Banks stepped up and said they are willing to act if the Greek elections spook markets. The Labor Department said weekly jobless claims to rose to 386,000 from 380,000 which topped the Street’s estimate for 375,000. Overall consumer prices slid by -0.3%in May which topped the Street’s estimate for a decline of –0.2%. Core prices rose by +0.2% which topped the Street’s estimate for a gain of +0.1%. The government said, for the first quarter the current deficit data totaled $137.3billion, which is greater than the $130.9 billion deficit that had been anticipated. Again, stocks rallied on hopes that “bad” data will force the Fed’s (and other central bank’s) hand. Stocks rallied on Friday after the latest round of economic data was released. The data suggested that the US economy is “slowing” which investors are hoping will force the Fed’s hand at their next meeting later this month.

Market Outlook- In A Correction

From our point of view, the market is back in a correction now that all the major averages are back below their respective 50 DMA lines. Looking forward, we want to see a powerful accumulation day to confirm the latest rally attempt. Technically, the 200 DMA line and June’s lows are the next level of support while the 50 DMA line is 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!

21 Apr
Daily Market Commentary

Strong Week On Wall Street!

Thursday, April 21, 2011
Stock Market Commentary:

Stocks rallied on the shortened holiday week helping the Dow Jones Industrial Average hit a fresh 2011 high! The market is back in a confirmed uptrend after all the major averages jumped back above their respective 50 DMA lines. The healthy action was in response to a series of stronger than expected Q1 results and a host of solid economic data. Now that the market is back in a confirmed rally, odds favor higher, not lower prices lie ahead.

Monday & Tuesday’s Action: U.S. Credit Rating Cut To Negative; Stocks Rally on Strong Earnings & Economic News

Before Monday’s open, the S&P rating service cut the U.S. long term credit outlook to negative which tends to serve as a warning shot before an official downgrade.  S&P put a “negative” outlook on the U.S. AAA credit rating, and said surging budget deficits and massive government debt were the primary culprits. This sent a slew of so-called “risk” assets lower as traders are fearful that the robust 8-month rally that began in late August may be in jeopardy. The initial reaction was intense as it sent all the major averages diving below their respective 50 DMA lines. However, by the end of they day, buyers showed up and erased much of the losses.
Stocks edged higher on Tuesday as they recovered from Monday’s shellacking. Before Tuesday’s open, investment powerhouse, Goldman Sachs (GS) reported Q1 results which topped the Street’s estimates. However, earnings were down -22% from the same period in 2010 while sales slumped by -5%. The stock opened higher higher but quickly reversed and traded lower as it continues falling further and further below its 50 & 200 day moving average lines. In addition, according to IBD, Goldman’s EPS rating has plunged to 13 (99 is the highest possible rating) while its relative strength rating has tanked to only 22 (99 is the highest possible rating) which indicates weakness, not strength.
Wednesday & Thursday’s Action: Stock Surge on Heavy Volume!
Several high profile companies released stronger than expected Q1 results between Tuesday’s close and Wednesday’s open. International Business Machines Corp. (IBM), Intel Inc. (INTC), AT&T (T), Wells Fargo (WFC), and Yahoo! Inc. (YHOO), were among some of the companies which released solid Q1 results and set the stage for Wednesday’s strong rally.  It was very encouraging to see all the major averages confirm their latest rally attempt and jump back above their respective 50 DMA lines on heavy volume. After Wednesday’s close, a slew of high-profile companies released Q1 results. Some well-known names were tech giants Qualcomm (QCOM) & Apple (AAPL), F5 Networks (FFIV), American Express (AXP), Chipotle Mexican Grill (CMG), and Amgen Inc. (AMGN). In other news, Sweden and Thailand’s central banks raised rates which sent the greenback tumbling as the U.S. Fed shows no signs of raising rates in the foreseeable future. Existing home sales rose last month which was the latest piece of stronger-than-expected data from the ailing housing market.
Stocks rallied on Thursday even though Jobless claims missed estimates. Jobless claims fell by -13,000 last week to 403,000 which was just above the 400k mark. Meanwhile, the four-week average rose +5,500 to 395,750 which was the highest reading since the middle of March.  The stock market will be closed on Friday in observance of Passover and Easter.

Market Action- Market In A Confirmed Rally

From our point of view, the market is back in “rally-mode” as all the major averages continue to trade above their respective 50 DMA lines and are flirting with, or at, fresh 2011 highs! In addition, leading stocks have held up very well even as the major averages slid below their respective 50 DMA lines in mid-April. If you are looking for specific help navigating this market, please contact us for more information.

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