30 Jun
Daily Market Commentary

Week-In-Review: 2017 Is Half-Way Over; Nasdaq Tracing Out Big Head and Shoulders Top

Nasdaq Traces Out A Big Negative Monthly Reversal
The complexion of the market changed considerably in June as fatigue finally set in after a very strong rally. June was littered with a spate of heavy volume down days, especially in tech stocks, which is not ideal for this aging bull market. The biggest negative divergence occurred in the Nasdaq and the Nasdaq 100, when they both traced out a large negative reversal on a monthly basis. They both closed below their respective 50 DMA lines on Friday which is not ideal. Additionally, they both snapped a very strong win streak and are tracing out a large head-and-shoulders top pattern.  In fact, over the past 12 months, the Nasdaq only had two down months (Oct 2016 and June 2017). Normally, a down month is not a big deal but when it is a big negative reversal on a monthly basis, occurs after a big move, happens on heavy volume, and a slew of leading stocks were smacked, then something else is at play.  The market went from being exceptionally strong to beginning to show signs of near-term fatigue in June. As of Friday’s close, the so-called FAANG stocks are not acting well- only Facebook closed above its 50 DMA line while Amazon, Apple, Netflix and Google (Alphabet) are all below their respective 50 DMA lines. Remember, the 50 DMA line is a normal area of support, so a close below that level is not ideal. The bulls argue that this is another normal and healthy pullback because even with all the technical damage occurring, the major averages are still only a few (<4%) percentage points below their record highs. From where I sit, if the bulls show up and send the market higher from here- then we will have another very nice buying opportunity and there are a ton of early entry points forming in leading stocks. Conversely, if the selling gets worse, and all the major indices close below their respective 50 DMA lines, then a much more defensive stance will be warranted.

Mon-Wed Action:

Stocks opened higher but closed in the lower half of the range on Monday on the last full trading week of the month and quarter. Durable goods orders fell -1.1%, missing estimates for negative -0.4%. The Chicago Fed National Activity Index fell -0.26, missing estimates for a small gain of 0.32. The Dallas Fed Mfg Survey came in at 12.3, lower than the last reading of 23.3. On Tuesday, stocks fell hard after the Senate delayed the health-care vote and sellers showed up and sent a slew of tech stocks lower in heavy volume. Once again, economic data was mixed. The S&P Corelogic Case-Shiller HPI came in at +0.3%, missing estimates for +0.6%. Separately, consumer confidence came in at 118.9, slightly higher than the Street’s forecast of 116.7. Finally, the Richmond Fed Manufacturing Index came in at 7, missing the consensus reading of 8. Mixed to less-than-thrilling economic data aside, the heavy volume sell off in tech stocks was definitely not a healthy sign.
Stocks bounced back hard on Wednesday after bank stocks soared and the bulls showed up and defended the 50 DMA line for the Nasdaq. After Wednesday’s close, the Fed released the results of its “stress test” and all the banks passed. Either the market was extremely lucky or someone leaked the information ahead of time. Separately, Janet Yellen and a few other Federal Reserve Officials publicly expressed concerns about the stock market. Mr. Williams said the stock market is running on ‘fumes’ and Dr. Yellen said, asset prices are ‘rich’ at these levels. Separately, pending home sales slid -0.8%, missing estimates for a gain of +0.5%.

Thur & Fri Action:

On Thursday, the sellers showed up in spades and sent a slew of tech stocks lower in heavy volume. The market appears to be tracing out a near term top as so many stocks continue to fall in heavy volume. Before the open, the government said, GDP grew by +1.4%, in Q1 2017, beating estimates for a gain of +1.2%. That didn’t stop the sellers from showing up. Stocks edged higher on Friday as the bulls showed up to defend the 50 DMA line for the Nasdaq on the last trading day of the month and quarter. June was littered with a spate of heavy volume down days which is not ideal for the market. We will see how this plays out over the summer.

Market Outlook: Bulls Defend Support

The bulls showed up and defended important support last week (50 dma line). As long as support holds, the bulls remain in control of this market. As always, keep your losses small and never argue with the tape. Get Our Free e-Book: Learn How To Buy Leading Stocks…EARLY. Get It Here…

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

31 Mar
Daily Market Commentary

Week-In-Review: Bulls Defend Support

Bulls Defend Support

Here’s how the market performed in Q1 (& so far in 2017): DJ Industrial Avg +4.56%, S&P 500 +5.57%, Nasdaq Comp +9.82%, Russell 2000 +2.13%. The title of last week’s article was: Market Tests Support. On cue, the bulls showed up earlier in the week and defended support for the major indices (50 DMA line which was highlighted for you in last week’s report). That was the first real test of the 50 DMA line since the election. For now, the bulls emerged victorious because that level was defended. Going forward, the bulls remain in control as long as the major indices remain above that important level. I do want to note that the tape is getting a little messy and several important areas of are below their respective 50 DMA lines: Transports (IYT), Steel Stocks (SLX), Russell 2000 (IWM), Mid-Cap 400 (MDY), Materials (XLB), just to name a few. Right now, there are three options: 1. the market bounces from here, lifting these areas back above their 50 DMA lines. 2. The major indices rollover and break below support. 3. The market moves sideways for a few months to consolidate the recent move. Until the market cracks, the bulls have earned the benefit of the doubt and the market likely heads higher from here.   

Mon-Wed Action:

Stocks fell on Monday as the major indices tested their respective 50 DMA lines for the first time since the election. The Dow Jones Industrial Average posted a 8-day slide which was the longest since 2011. The narrative of the day was that investors were concerned Trump’s tax reform bill would get blocked because the Healthcare bill didn’t pass. Stocks opened lower and closed higher on Tuesday after the bulls showed up and defended support (50 DMA line). The Dow snapped its 8-day losing streak and rallied nicely causing the buy-the-dip crowd to step in and buy the first real dip since the election. Stocks closed mostly higher on Wednesday after the United Kingdom passed article 50 which officially begins the Brexit process.

Thur & Fri Action:

On Thursday, the market rallied nicely as bank and energy stocks bounced back from deeply oversold levels. The Nasdaq posted a record close as tech stocks continue to shine. In other news, oil jumped above $50 a barrel as it also bounced back from oversold levels. Stocks were relatively quiet on Friday which was the last day of the month and quarter. 

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