They are calling it the worst weekly performance this year! For the week the Dow Jones Industrial Average (chart) fell a modest 1.15%, the Nasdaq (chart) -0.41%, the S&P 500 (chart) -0.50% and the Russell 2000 (chart) basically closed the week unchanged. If this was the sharpest decline of the key indicies in 2012, I think the bulls will take it and the bears must be scratching their heads.

Coming into the new year, I don’t think anyone would of projected that the worst declines of the year for the major indexes would be a paltry 1% or so in a given week. Especially when you considered the enormous volatility that occurred in 2011. The week ahead may be back to the status quo for stocks as we will be in the final week of the first quarter of the trading year which should initiate the proverbial window dressing methods implemented by certain fund managers. Window dressing is a strategy used by institutional investors and mutual fund managers as the end of the quarter or year approaches to augment the performance of their respective funds or portfolios. In most instances these managers may sell the stocks in their portfolio that are at a loss and purchase high beta momentum stocks to improve the overall appearance and return on their portfolios. We will see if this strategy rings true by weeks end. Good luck to all.

Have a great weekend 🙂

~George

Stocks continue to lift this week as the nations top banks passed their respective stress tests and strong economic data continues to stream in. For the first time in years the S&P 500 (chart) closes above the 1400 level. Also, the Nasdaq (chart) on Tuesday closed over 3000,  a level not seen in over a decade. The Dow Jones Industrial Average (chart) continues its march north of 13,000 and the small-cap bellwether Russell 2000 (chart) closed in the 830 area. This 830 zone for the Russell has provided significant resistance as of late, so we will see if the this index can breakout like the other key indices have.

There is one other average I am watching to see if this incessant market run can continue, and that is the Dow Jones Transportation Average (chart). Market pundits have argued that during this bull market the transports have lagged and have not really participated in the rally. In fact, this is what the short side has relied on in part to support their short thesis. Historically speaking, when equities are rallying and the transports are not, this is an indication of an imminent reversal for equities. Well in today’s session the Dow Jones Transportation Average (chart) had one of its strongest days of the year. I am looking now for a a meaningful break above the 5400 level in the transports. If this occurs and if the transports can remain above 5400, this could be yet another powerful indicator that supports this bull market.

Good luck to all.

~George

The old wall street adage “The trend is your friend” is certainly ringing true in the stock market so far this year and now the job market apparently is beginning its own trend. February’s jobs report announced yesterday was once again better than expected. Although the headline unemployment rate remained at 8.3%, the economy welcomed in 227,000 new jobs. This is the third month in a row that payrolls have increased by over 200,000.

Once again traders and investors are embracing the signs of a stronger economy which is buoying the stock market. Just as the markets appeared to be headed for their first meaningful pullback of the year earlier this week, the bulls stepped into stocks on Wednesday providing a floor and sending equities higher the rest of the week. Most of the key indices were up on the week with the Dow Jones Industrial Average (chart) finishing slightly in the red off 0.43%. The S&P 500 (chart) notched a slight gain of 0.09%, the Nasdaq (chart) +0.41% and the small-cap index Russell 2000 (chart) lead the way posting a 1.82% gain.

Tuesday’s triple digit loss for the Dow Jones Industrial Average (chart) could of easily unnerved the bulls and gave the bears hope that the much anticipated sell-off had begun. However, once again equities demonstrated their undeniable resilience and continues to find support with any attempt of a pullback or sell-off. Although the bears argue that volumes remain light, there is no denying that this is one of the most powerful trends to the upside that the markets have seen in years.

Have a great weekend 🙂

~George

For all of you college basketball fans, March Madness has arrived! For all of the investors and traders out there, will the bullish madness continue? I guarantee the short interest is exhausted and asking that exact question.

On the week, the Dow Jones Industrial Average (chart) closed basically flat at 12977, The Nasdaq (chart) closed the week up 0.42%, the S&P 500 (chart) +0.28%, and the small cap bellwether Russell 2000 (chart) lagged this week falling almost 3%. However, these key indices are off to the best start to a year ever and it seems like every time the market wants to sell-off, it is met with unprecedented support. I have been around these markets for almost 17 years and I cannot remember such resilience in equities. Call it an election year, call it an improving economy, call it that Europe is out of a catastrophic state, call it what you want, this freight train doesn’t seem to want to stop.

Technically speaking and according to the Relative Strength Index (RSI), the markets continue to trade near the upper end of overbought conditions, however, investors and traders alike don’t seem to care. Personally, I think a meaningful pull back in equities and commodities are long overdue, but I too have been expecting this for weeks now. One thing I know for sure is that the markets do not always give you what you expect when you expect it, so whether you have a long or short thesis, it’s best not to try to time the market. In closing and as a reminder, it is usually a good idea to keep protective stops in place should your position move against you.

Have a great weekend 🙂

~George

Stocks for the most part eked out modest gains this week as volatility remains dormant. For the week, the Dow Jones Industrial Average (chart) finished up 0.26%, the Nasdaq (chart) +0.41%, the S&P 500 (chart) +0.33% and the Russell 2000(chart) actually ticked down less than a quarter of a percent.

The S&P 500 (chart) did manage to close at its highest level in almost four years, however, oil keeps creeping higher as well and closed at almost $110 a barrel. If oil continues its upward trend, this could be the one catalyst that begins to put the brakes on this multi-month bull market run we have witnessed. The payroll tax cut extension will help off-set rising gas prices but I don’t think anyone wants to see oil prices climb higher or gas prices at $5.00 or $6.00 a gallon.

Everyone from economists to technicians have been proclaiming that the market is due to pause, that it’s overbought and needs a retracement. Well if oil trades above the $120 mark in the near future, we may just get what the pundits are predicting.

Have a good weekend 🙂

~George

This is beginning to sound like a broken record and the bulls like what they are hearing. Once again stocks closed the week up across the board. On the week the Dow Jones Industrial Average (chart) + 1.16%, for the year the DJIA is up almost 6%. The Nasdaq (chart) finished the week up 1.65% and for the year the Nas is up a whopping 13.31%. The S&P 500 (chart) closed the week up 1.38% and so far this year the S&P is up 8.24% and last but not least, the Russell 2000 (chart) finished the week up 1.89% and for the year the Russell is up a stellar 11.84%. This has been one of the best starts coming out of the gate for the stock market in decades and there doesn’t appear to be too much getting in its way.

Market technicians including myself have been expecting a pullback to occur and have been citing “overbought” conditions for weeks now (blog). However, these markets remain incredibly resilient and are seemingly poised to go higher. I am remaining cautious as to how much longer this incessant bull run will continue and will look for additional clues as to when the inevitable retracement will occur. There were a lot of traders and investors who missed this enormous bull run over the past few months. What kept many investors on the sidelines was and is the on-going debt crisis in Europe and what has caught many investors off guard, is the stronger than expected flow of economic data here at home.

That said, there are now a lot of traders and hedges funds licking their chops on short side opportunities in this overbought market. However, a short strategy is incredibly risky and requires an enormous amount of experience to execute successfully, so let’s see if this time they get it right.

Have a great holiday weekend 🙂

~George

Last week marks the first time this year that the key indices retreated, albeit modestly. The Dow Jones Industrial Average (chart) fell 0.47%, the S&P 500 (chart) -0.17%, the Nasdaq (chart) 0.06% and the Russell 2000 (chart) lost 2.14%. Still for the year these bellwether indexes are up sharply.

So why the pause? For the most part the pundits want you to believe that the Greek debt crisis is the reason. That in part may be true, but hardly anyone seems to be talking about how the markets appear to be a little exhausted and looks to be topping out? Let’s take a deeper look. One of the things I look for over and above the Relative Strength Index on stocks and indexes is market sentiment. There is extreme optimism in the markets right now with seemingly all of the headlines pointing to a bullish thesis. Also, there are a plethora of analysts coming out and raising their target prices on indexes and equities which can be construed as another indication of a topping pattern. Even BlackRock’s Larry Fink was recently quoted as saying “be 100% in stocks”.

Historically speaking, when you have the key indices and equities trading above the 70 and 80 value levels on the RSI, and you have market sentiment at extreme levels as we have today, a respectable pull back may be in the offing. Now if you add the continuing uncertainty of the European debt crisis to the mix, especially with Greece, this could cement the much anticipated retracement certain investors and traders have been looking for. Whatever the case is, it’s usually a good idea to lock in gains and make sure to use protective stops in your trading strategies.

Good luck to all 🙂

~George

Stocks took off out of the gate this morning on the heels of a better than expected jobs report. The headline unemployment number fell to 8.3%, its lowest level in three years. This propelled the major averages to multi-year highs. So far this year, the Dow Jones Industrial Average (chart) is up over 5%, the Nasdaq (chart) is up a whopping 11.54%, the S&P 500 (chart) +6.94% and the small cap index Russell 2000 (chart) is up an astonishing 12.17%. This is no typo and yes, these gains have occurred in a little over a month’s time.

Let’s look at the technical perspective of the markets and see if this current bull run will continue uninterrupted. In one of my January posts I referred to a technical indicator call the Relative Strength Index or the RSI. This indicator tracks oversold and overbought conditions and is used by a variety of market technicians as part of their analysis when evaluating current market conditions. As of the market close, all of the key indices and in particular, the Nasdaq (chart) are now in overbought territory with the Nasdaq (chart) on the cusp of the 80 value level – a level not see in over a year.

So what does all of this mean? Well, markets or stocks can be overbought and remain overbought for extended periods of time. However, historically when RSI levels are as elevated as they are today, especially with the indexes, be very careful about jumping on this bull freight train. I would expect a pullback, which actually would be very healthy for the markets, then hold at support levels and continue its uptrend. I am not suggesting that any of this will occur, I am merely pointing out that it would be prudent to allow the markets to take a breather before considering any additional long strategies.

Have a great weekend 🙂

~George

The markets closed out the week with mixed results following the Commerce Department’s release of the fourth quarter G.D.P. report. The Dow Jones Industrial Average (chart) finished the day down 74.17 points, the S&P 500 (chart) -2.11 with the Nasdaq (chart) and the Russell 2000 (chart) both eking out modest gains.

According to this mornings G.D.P. report, the U.S. economy grew at a 2.8% annualized rate in the fourth quarter coming in short of certain economists expectations. This seemed to affect the Industrials throughout the day and caused some apprehension as to the growth estimates going forward. Also, the Federal Reserve came out this week and said they expect short-term interest rates to stay near record lows at least through 2014. To me this is an indication that the Federal Reserve still sees an anemic economy well into the future, which might not bode so well for equities going forward. Couple that with earnings reporting season beginning to wind down and there doesn’t seem to be any near term catalyst in the markets to continue to propel stocks.

That said, momentum is a very powerful dynamic to the upside or downside and certainly equities have been on a tear as of late with the bulls in full control. However, it’s probably not a good idea to get too complacent and think that stocks can go up forever as we all have learned.  At the very bare minimum this market is seemingly poised for a pullback which actually could be very healthy for a sustainable uptrend. My concern is that one big sneeze out of Europe or if the most recent positive economic data here in the U.S. was just an anomaly, we could be in for more than just a “healthy pullback”?  Good luck to all.

Have a great weekend 🙂

~George

Stocks posted yet another week of gains as corporate earnings for the most part are coming in as expected and the Euro Zone had some success with their most recent bond issuances. For the week, the Dow Jones Industrial Average (chart) closed up 2.4%, the Nasdaq (chart) +2.8%, the S&P 500 (chart) +2.04% and the Russell 2000 (chart) closed the week +2.67%.

This week earnings will continue to take the spotlight with a slew of companies reporting their results. To kick off the week earnings will be out from Halliburton (NYSE: HAL) and Texas Instruments (NasdaqGS: TXN). On Tuesday, McDonald’s (NYSE: MCD) and Apple (NasdaqGS: AAPL) will give us their quarterly results and later in the week we will hear from AT&T (NYSE: T) and Caterpillar (NYSE: CAT) on how their quarter went.

Other key events this week will be a meeting in Brussels with the EU finance ministers, here at home the FOMC meeting takes place and President Obama holds his State of the Union address. Needless to say quite an eventful week ahead for the markets to contemplate.

One other unfolding technical event I will pay closer attention to is the beginning of “overbought conditions” in the key indexes and certain equities. For example, let’s take a look at the Relative Strength Index (RSI) of the S&P 500. We should all know by now, but for those of you who don’t, the RSI typically indicates whether or not a given index or equity is either overbought or oversold, depending on certain value levels. According to the RSI principle, the 70 value level or greater can be interpreted as an overbought condition and the 30 value or lower can be interpreted as an oversold condition. As you can see in the upper box of the S&P 500 (chart) the 70 value level is fast approaching. Now that doesn’t mean I am going to rush out there and short the markets, however, the RSI is a technical indicator that has historically been a reliable indicator as to overbought or oversold conditions. Please note that markets or equites can remain overbought or oversold for extended periods of time. I just want to point out that we are seemingly overdue for a bit of a pullback and certain market technicians employ the RSI model as a guide to assist them with their strategies.

Good luck to all and have a great week 🙂

~George