After a massive sell-off in commodities last week, volatility is still rampant in the sector. Let’s take a look at the PowerShares DB Commodity Index (NYSEArca: DBC) chart. This index tracks the likes of Oil, Natural Gas, Gold, Silver, Corn and Wheat, just to name a few. As you can see in the chart, over the past six months or so this index fund has gained over 30%, however, just over the past week or so the DBC has given back over 10% of those gains. Even more impressive out of this basket of commodities is Silver. Silver (NYSEArca: SLV) chart has given back  a whopping 33% of its historic run. Has the underlying fundamentals of the commodity space changed so much in the last week or so?

As long as we continue to see growth in developing countries and the global printing presses remain on, I would expect that this correction is healthy for the space and is needed in order to resume its powerful uptrend. Here is the catch and a few prerequisites should you choose to enter or re-enter the sector: 1. You must have a strong stomach to endure the volatility that is inherent in commodities. 2. You must have a higher risk tolerance than most. 3. You must limit your losses should you enter this space and the trade goes against you in a meaningful way. Of course these are only a few disciplines one should adhere to when investing in any market and also one should always seek the counsel of a professional investment advisor before consideration.

Have a good evening.

~George

Is it me or is it every time equities pullback lately they are met with significant support and then they resume their uptrend? Let’s take a look at the past six months performance of the Dow (chart), the S&P 500 (chart) and the Nasdaq (chart). Seemingly, every time a pullback or a mini sell-off has occurred, one way or the other stocks find support and then continue to rally. Another key indicator is the 50 day moving average, this technical indicator has also provided a support zone for most of the indexes. The old adage “the trend is your friend” has never rang more true then the market environment we have been in.

This has been a text book trending market and if you have played it this way, congratulations. However, I think there are just as many investors and traders especially on the short side that are scrathing their heads and cannot figure out why this market is so resilient. Once again whether you are in a bull or a bear market, market sentiment can become an overpowering force and it is usually best to not fight the tape. If you beleive that equities are a bit frothy, then you always have the choice to sit on the sidelines until opportunities come to you rather than you chasing them down.

Good luck to all.

~George

A much stronger than expected employment report released on Friday helped fend off a market sell-off that occurred during most of the week. The private sector added 244,000 jobs in April well above the 185,000 that the street was expecting. This is one of the biggest corporate hiring binges in years which supports the notion that the overall economy is indeed improving. Stocks did advance in light of the employment report, however for the week the Dow (chart) fell 171 points, the S&P 500 (chart) was down 1.7% and the Nasdaq (chart) gave back almost 46 points.

In a bull market I think it is very healthy and even necessary for equities and indexes to pullback and consolidate before resuming its trend. However, when you have such a hot market especially in the commodities space and even more specifically the unbelievable run in silver, sell-offs tend to be more dramatic and unnerving. Now that volatility is increasing, this should serve as a reminder to not let the emotion of fear or greed get in the way of investment objectives.

As Q1 earnings reporting season winds down, more attention will be placed on the economy and the jobs market and it will be very interesting to see how the markets will set up for the end of the Fed’s quantitative easing program which expires at the end of June.

Have a great weekend 🙂

~George

Despite a stronger than expected report on Monday coming out of the construction sector and a higher reading from the ISM manufacturing index, equities and commodities for the most part have been trading lower. The question now is are we experiencing a market that is just tired and needs to consolidate for a bit, or is this something more? Even the consumer is showing signs of life according to MasterCard (NYSE: MA). The company came out yesterday and reported a very strong quarter with an earnings per share increase of 24% on the heels of cardholders spending more money. A much welcomed sight to see a more confident consumer. However, the markets seemingly have gone straight up over the past several months only to be met with occasional pullbacks.

If a consolidation pattern occurs with the indexes or commodities, a common investment thesis in this type of market is to implement a covered call program on your long positions. This is one way to generate income while you wait out a consolidating or sideways market. This strategy is complex and is not for everyone, so be sure to consult your professional financial advisor should you choose to consider such a strategy. Time will tell whether or not we are entering a period of consolidation and I will certainly be keeping my eyes open should it turn out to be something more.

Good luck to all.

~George

For those of you that have been investing in the markets for some time, you have undoubtedly heard the old adage “Sell in May” and go away. This premise is based on that most of the money  made in the markets typically occur from November through April and that the summer months are generally lower in volume, hence more volatility can occur. Well this summer may not hold true to form. After a blistering April where the Dow (chart) surged almost 4% for the month, the S&P 500 (chart) rose almost 3%, the Nasdaq (chart) climbed over 3% and the benchmark for small-caps, the Russell 2000(chart) closed at all time highs. Could this current momentum carry over into May and possiibly throughout the summer?

The bullish case for the continuation of this incessant rally is as simple as how strong corporate earnings are and that the Fed is showing no signs of hiking interest rates anytime soon. This is a one-two punch for the bulls. The bearish case is that the markets are technically overbought and that the underlying fundamentals of the economy do not justify multi-year highs in a variety of asset classes.

This upcoming week promises to be filled with more transparency pertaining to the health of the economy and corporate America. A slew of economic reports are due to come out from construction spending to factory orders as well as the closely watched non-farm payroll report due out on Friday. Also, earnings from Visa (NYSE: V) and Mastercard (NYSE: MA) should shed some light on the health of the consumer.

Have a safe and prosperus week.

~George

The Dow (chart) and the S&P 500 (chart) closed at their highest point in almost three years while the Russell 2000 (chart) index of small-cap stocks closed the month at record highs. So far so good for Q1 earnings reporting season which is now past the half-way mark. Many companies in a broad array of sectors from commodities to industrials to technology have exceeded their earnings estimates and in some instances provided strong forward looking guidance. Also, we talked technicals the other day (blog) and now seemingly both the S&P 500 (chart) and the Nasdaq (chart) have broken out of a double top formation.

Instinctually you may think how in the world can these markets continue to lift with gas prices in many states now exceeding $4.00 per gallon and joblessness still abound? There are several arguments the bulls and the bears are presenting as to what lies ahead for equites but one thing is for sure, right now there is an insatiable craving for risk and the momentum of commodities and equities alike have become parabolic. Congratulations to all of you bulls out there and as for the bears, one has got to believe at some point and time a healthy pullback lies in the cards.

Enjoy the weekend 🙂

~George

Now that the Q1 reporting season is about half-way through, let’s look at the four key indexes and how they are shaping up technically. The Dow Jones Industrial Average (chart); after hitting multi-year highs last week, it appears that the Dow is not yet in an overbought condition at least according to the Relative Strength Index also known as the RSI. Certain market technicians look for a reading above the 70 value before they consider that an index or equity is overbought. The S&P 500 (chart); the same rings true here with the S&P and the RSI value, however an interesting formation is potentially occurring in the form of a double top with the possibility of double top breakout, should the S&P break above the 1340 area and stay above it. The Nasdaq (chart); has almost the identical set-up as the S&P 500 and last but not least the Russell 2000 (chart); the leading small cap index remains above its 50 day moving average and appears to be consolidating in the 840 area.

So you ask “what does all of this mean”? Technically speaking all of these indexes are indeed trading above their 50-day moving averages and seem to be in some sort of consolidation mode. Q1 earnings for the most part have been very impressive which has helped sustain the bull market status quo. One technical I will be looking for is if the S&P and Nasdaq can break out of their double top formations and continue their upward trajectories. If this happens we could be in for more upside to this market. Good luck to all.

Have a very prosperous week.

~George

Equities got a boost this week from stronger than expected earnings reports out of Intel (NasdaqGS: INTC) report, United Technologies (NYSE: UTX) report and Apple (NasdaqGS: AAPL) report, just to name a few. This helped lift the Dow Jones Industrial Average to multi-year highs (chart).

If you are a bull, this is a much welcomed sight especially after last weeks earnings reports from Alcoa (NYSE: AA) and Google (NasdaqGS: GOOG). These companies came in under what the street was expecting and created some concern over the rest of this earnings reporting season.

Next week there will be no shortage of action as we continue to hear from corporate America and navigate through Q1 earnings.

Enjoy the holiday weekend 🙂

~George

The death of the personal computer has been greatly exaggerated. This was confirmed by Intel’s (NasdaqGS: INTC) record quarter which the company reported yesterday after the close. The company’s shareholders were rewarded today with Intel’s stock closing up 7.80% at $21.41 (chart). The stock also soared past its 50 day and 200 day moving averages, which certain market technicians pay attention to and act upon.

The pundits have been claiming that the P.C. market is being cannibalized by the proliferation of the latest craze in tablets, especially the iPad. One of the factors these experts have failed to consider is how much P.C. demand there is in the emerging market space and the rest of the world for that matter.

That said, Apple (NasdaqGS: AAPL) just reported their earnings after the close today and they too blew out their quarter with revenues up an astonishing 83% reporting a net profit of $5.59 billion. The growth of Apple and the demand for its products  is simply unbelievable. It appears that this bull market has more room to run.

~George

The markets on Friday got a lift from strong economic numbers out of the manufacturing sector along with a tame inflation report. This data helped calm investors nerves from the disappointing earnings results provided last week by Alcoa (NYSE: AA) results, JPM Chase (NYSE: JPM) results, Google (Nasdaq:GOOG) results and Bank of America (NYSE: BAC) results. As you peruse their earnings results, seemingly all of these companies had relatively strong quarters. However, expectations are so high and stock prices have lifted in anticipation of Q1 results, companies really need to outperform in all areas of their balance sheets.

That said, a look ahead to this upcoming week will provide further insight into the health of corporate America. Earnings results are scheduled to come out of the likes of Citigroup (NYSE: C), Eli Lilly (NYSE: LLY), American Express (NYSE: AXP), Apple (NASDAQ: AAPL), General Electric (NYSE: GE) and McDonalds Corp (NYSE: MCD) just to name a few. So hang on to your hats for this upcoming week should be a doozy.

Have a very prosperous week 🙂

~George