16 Aug
Daily Market Commentary

All Eyes On Europe

Tuesday, August 16, 2011
Stock Market Commentary:

Stocks opened lower as the world awaited the conclusion of the much anticipated meeting between France and Germany. In the U.S., the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s (8.16.11) lows hold- there is a strong chance that the markets may be forming a short-term low. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce.

EU Debt Woes Ease & Housing Starts Fall Less Than Expected:

The Commerce Department reported that housing starts slid -1.5% to a seasonally adjusted annual rate of 604,000 units. The report topped estimates for 600,000 but did little to help the ailing housing market since June’s reading was revised down to a 613,000, from 629,000. Lower revisions typically bode poorly for the underlying investment. The one ray of light was that housing starts rose +9.8% from the same period last year.  A separate report showed U.S. industrial output rising +0.9% last month, more double June’s +0.4% and the fastest gain in 7 months. In Europe, France and Germany ruled out a new Euro Bond which was designed to help alleviate Europe’s onerous debt burdens but agreed to several other factors aimed at restoring confidence in the troubled continent. The latest GDP data out of Europe missed estimates.

Market Outlook- Market In A Correction

The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.
 

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17 May
Daily Market Commentary

Stocks Slide on Tepid Economic Data

Tuesday, May 17, 2011
Stock Market Commentary:
Stocks and a host of commodities fell after the latest round of tepid economic and earnings data was released. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.

Q1 Economic Results, Housing Starts, & Industrial Production:

Before Tuesday’s open a slew of high profile companies released mixed-to-lower Q1 results and the latest economic data missed estimates. The Commerce Department said housing starts (a.k.a. new homes being built), fell -11% from March and missed the Street’s estimate of 569,000. Work began at an annual pace of 523,000 houses last month. The report showed that building permits, a sign of future construction, also fell. This was the latest in a series of dissapointing data from the ailing housing market. A separate report showed that industrial production was unchanged in April which fell short of the Street’s estimate for a +0.4% increase.

Market Outlook- Rally Under Pressure

From our point of view, the market rally is under serious pressure which suggests caution is paramount at this juncture.  Looking forward, the next level of support for the major averages are their respective 50 DMA lines and resistance is their 2011 highs. The rally remains in tact as long as support holds on a closing basis. If you are looking for specific help navigating this market, please contact us for more information.

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16 Feb
Daily Market Commentary

S&P 500 Up 100% From March 2009 Low!

Wednesday, February 16, 2011
Stock Market Commentary:
Stocks rallied on Wednesday after the latest round of economic, earnings, & M&A news were released. The benchmark S&P 500 is up 100% from its March 2009 low! The benchmark S&P 500 is up 100% from its March 2009 low! 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.

Housing Starts, PPI, and Industrial Production:

After Tuesday’s close, Dell (DELL), the world’s second largest computer manufacturer said earnings and revenue easily topped estimates. This set the stage for a healthy rally in a slew of tech stocks. The news on the M&A front was also healthy as Sanofi-Aventis (SASY.PA) said it plans to acquire Genzyme (GENZ) for $20.1 billion in cash and activist investor Nelson Peltz’s Trian Group offered to acquire Family Dollar Stores Inc (FDO) for $55 to $60 per share in cash or $7.6 billion.
Housing construction was mixed last month and remained at a very weak levels. Starts advanced while permits fell back. Housing starts rose +14.6% after falling -5.1% in December. Elsewhere, the producer price index (PPI) rose which suggests inflation is accelerating. The headline number rose +0.8%, matching the median forecast. Core prices, which strip out food and energy, rose +0.5% which topped the Street’s estimate for a +0.2% gain. If inflation continues to accelerate, the Fed will have more pressure to raise rates sooner than expected. A separate report showed industrial production falling to 5.2% from 6.3% in December. At 2pm EST, the FOMC released the minutes of its latest meeting which largely reiterated their recent support for QE II.

Market Action- Confirmed Rally; Week 25 Begins

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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18 Nov
Daily Market Commentary

Stocks End Lower On Tepid Economic Data

Market Commentary (11.18.09):

The major averages closed lower after a series of mixed economic data was released. Volume, a critical component of institutional demand, was higher than Tuesday’s levels which marked a distribution day for the Nasdaq but the losses were too small to constitute a distribution day for the NYSE. However, the fact that the major averages were down for most of the session and closed near their intra day highs helps offset that concern. There were 40 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, the same number of issues that appeared on the prior session. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.

Economic Data:

The big economic news of the day was released before the market opened, at 8:30 am (EST). In Washington D.C., the Labor Department released a stronger-than-expected consumer price index (CPI) which ignited inflationary concerns. Headline CPI rose +0.3% which was higher than the Street’s forecast for a +0.2% gain.  Core CPI, which excludes food and energy, was unchanged from last month’s reading of a +0.2% gain. However, core prices also topped the Street’s estimate for a +0.1% gain and is the component of the report that the Federal Reserve tends to focus on. The uptick in consumer prices sparked concern that companies will have little room to raise prices this holiday season (which curbs earnings). The primary reason is that the consumer remains weak: unemployment is at a 26-year high of +10.2% and wages fell -5.2% in September from the same period last year. The Commerce Department released a separate report at 8:30am (EST) which showed that housing starts unexpectedly tanked last month. Housing starts (a.k.a registrations for new construction for residential housing units), slid -10.6% in October which was well below estimates. Permits for new construction slid -28.9% from the same period last year which led many to question the sustainability of the housing recovery.

Focus On Price & Volume, Not The Noise

Those of you who have read this commentary over the past 5 years know that we like to analyze the news but pay a lot more attention on how the market reacts to the news. That said, the market has reacted and continues to react rather well to the latest round of economic and earnings data. The vast majority of third quarter earnings are now behind us and the major averages remain perched just under fresh 2009 highs! Barring some unforeseen event, earnings were down for the average company in the S&P 500 for the ninth straight quarter but managed to exceed the average estimate which is one reason why the market’s have reacted rather well to earnings. That, coupled with the notion that the “worst is behind us” explains the market’s collective “take” on Q3 earnings. In addition, economic data, although not impressive, has improved markedly from this time last year which suggests the global government stimulus packages are working. The benchmark S&P 500 has surged a whopping +64% from its 12-year low in March as global GDP rebounded. The eight-month rally has pushed the index’s p/e ratio (i.e. valuation) to 22.3 which is the highest reading since 2002 according to Bloomberg.com. Our two primary concerns regarding this rally remains: the dearth of high quality leadership triggering technical buy signals & waning volume in recent weeks. Continue to focus on our two favorite sectors right now: large cap technology and gold as a good proxy for the market.