The markets experienced one of the most volatile weeks in recent memory. In fact, the Dow posted its biggest weekly decline in over two years. What’s more, Friday evening Standard and Poors downgraded the U.S. credit rating from AAA to AA. In my first blog of the month (blog) I eluded to the fact that August is typically a softer month for stocks, however, I wasn’t expecting this. For the week the Dow (chart) lost 698.59 points or 5.8%, the tech heavy Nasdaq (chart) lost 223.97 points or 8.1%, the S&P 500 (chart) -92.90 points or 7.2% and the Russell 2000 (chart) gave up the most ground on a percentage basis losing a whopping 10.3% on the week. Equities are most definitely in a correction mode.

Next week promises to be just as volatile as this past week, especially with the Standard & Poors downgrade of the U.S. credit rating. I think it’s important to reflect on history as it pertains to the markets. This period of time reminds me a bit of the circumstances and subsequent fear that took hold of the markets in the 2008/2009 market crash. Although the circumstances are quite different today compared to the 08 the debacle, the rampant fear and panic selling feels similar. Let us remember that after the panic selling of 08/09 was over, the S&P 500 doubled in value. I am not suggesting that we will see a repeat performance of the downside or upside to the markets, what I am suggesting is that fear and panic has never benefited any investor. Let us also not forget there are a lot of healthy corporate balance sheets out there and most likely even the most pristine companies will get dragged down by this current market environment. In times like these, cooler heads most always prevail. Good luck to all.

Have a great weekend 🙂

~George

Call it the debt ceiling debate, the European mess, the U.S. economy or a combination of all three, whatever it is, the markets have technically broken down. This week all of the key indices have broke below their respective 200-day moving averages. Let’s take a look at the Dow (chart), the Nasdaq (chart), the S&P 500 (chart) and the Russell 2000 (chart).

So what now? Although the 200-day has been violated in each of the key indexes, and technically speaking this is a bearish event, let’s now turn our attention to the Relative Strength Index or RSI. Certain market technicians utilize both the moving averages and RSI to evaluate current market conditions. The case with the RSI is whether or not an index or a security has become overbought or oversold. Looking at the charts of the key indexes, they all have now broken below the 30 value level which is the level that indicates that a security or index is becoming oversold according to the RSI metric. This doesn’t mean to go out immediately and go long this market for stocks or indexes can remain oversold or overbought for extended periods of time. However, what this does mean is historically when the RSI value breaks below 30 (oversold) or above 70 (overbought) a reversal of the trend typically occurs at some point and time.

Remember technical analysis can be a useful tool when evaluting markets, however, fundamentals and the macro environment is what typically drives the markets and looking at where we are today the markets are not very happy with the picture.

~George

Although the Dow was off slightly today, the four major indices had a very solid week of gains. For the week, the Dow (chart) closed up 1.61%, the Nasdaq (chart) up 2.47%, the S&P 500 (chart) up 2.19% and the Russell 2000 (chart) finished the week up 1.57%. For the most part, tech earnings have exceeded expectations powering the Nasdaq higher by almost 10% just in the last month or so. Also yesterday, the markets got a boost from the E.U. which reached a deal to resolve the Greek debt crisis. All in all a very positive week for equites.

A look ahead to next week and there is certainly no shortage of economic news and corporate earnings reports from the likes of Texas Instruments (NYSE: TXN), Netflix (NasdaqGS: NFLX), Ford (NYSE: F) and United Parcel Service (NYSE: UPS) just to name a few. As always proceed with caution during earnings reporting season for there is usually an increase in volatility and earnings surprises that co-exist during this period.

Have a great weekend 🙂

~George

Talk about a blowout quarter! Apple (NasdaqGS: AAPL) absolutely tore the cover off the ball. The company reported an all time record quarter with over $28 billion in revenue, earning a whopping $7.79 per share. On average the street was expecting revenue of $25 billion and a $5.85 e.p.s. Shares at one point surged to over $400 dollars in after hours trading. What can you say other than this is just a remarkable growth story and a company that continues to be the innovative leader in tech. This likely will help fuel today’s powerful rally which came on the heals of strong numbers out of IBM and chatter out of Washington of a potential deal on the debt ceiling issue.

On the day the Dow (chart) finished up over 200 points, the Nasdaq (chart) up 60+, the S&P 500 (chart) +21 and the small cap Russell 2000 (chart) finished up 18.65. Earnings reporting season seemingly always creates upside and downside surprises, and so far the tech titans have over delivered.

Have a good evening.

~George

International Business Machines (NYSE: IBM) reported their 2Q earnings after the close and boy did they deliver. Revenue came in $1 billion more than expected, is that a typo? No it isn’t, in fact they also raised their guidance for the year to at least $13.25 per share from a prior projection of $13.15 per share. Now that’s the top line growth that I have been looking for and a much welcomed sight. Just like Google (NasdaqGS: GOOG) last week, hopefully this stellar report can calm the markets most recent fears.

Powerhouse Apple Inc. (NasdaqGS: AAPL) reports tomorrow and I am certainly very interested in what they report, and more importantly what their future outlook is.

Good luck to all.

~George

Despite Google’s blowout quarter and a green day for stocks on Friday, all of the major indexes closed down sharply for the week. In fact in was one of the steepest weekly declines in almost a year. For the week the Dow (chart) finished down 1.4%, the Nasdaq (chart) -2.45%, the S&P 500 (chart) -2.06% and the Russell 2000 (chart) fell almost 3%. Right now it appears earnings reporting season is being overshadowed by the governments inability to reach a deal on the debt ceiling increase as the deadline is closing in. Call it what you will but the political jockeying must come to an end or we could indeed be in for a very turbulent market environment.

There is too much uncertainty for me to have any confidence in taking on any new risk. Couple this with earnings reporting season kicking into high gear next week and you can almost count on much higher volatility in the markets.

Have a good weekend 🙂

~George

After a week of selling pressure in the markets, finally some good news from tech titan Google (NasdaqGS: GOOG). Google’s shares are surging 10% in the after hours session after reporting a blow-out quarter, earning $8.74 per share. That is almost a $1.00 per share above what analysts were expecting. Hopefully this can be a catalyst to help the tech sector and the overall markets which has sold off sharply over the past several days.

Next week other tech titans such as IBM, Apple and Intel are set to report, so let’ s see if these bellwethers can demonstrate the strength in earnings power as Google just did.

Have a good evening.

~George