For the month of October the key indices were up more than 3%. Who would of thought considering the state of the economy and the pending mid-term election results. Friday’s GDP report indicated that the economy grew at a tepid 2% which is certainly not enough to have a meaningful effect on job growth. I have got to believe that the markets recent strength and stability is in part in anticipation that the GOP will take control of the House and possibly the Senate. If this occurs this should bode exceptionally well for businesses and taxes, which in my book are the two keys to build the confidence of business owners so they can start deploying capital for expansion and to start hiring again. One thing for sure, America is about to speak out and Congress will most certainly look very different going forward.

Have a great weekend.

~George

Over the past couple of months it seems that every time the market wants to go lower it is met with support and ends up rallying by the close. At one point today the Dow was down 150 points or so however closed down only 43.18, with the Nasdaq actually turning positive. This type of market action is seemingly indicative of expectations that the economy 6 to 12 months from now should be growing at a much faster pace. I have been looking forward to hearing what Norfolk Southern (NYSE: NSC) had to say in their earnings report and as mentioned in my previous blog for me the railroad transportation sector is a key metric in understanding economic activity at least from the ground floor level. Today’s earnings report by NSC indicated that their shipment volumes are increasing across the board.

Although it may not feel like we are in an economy that is growing you can’t ignore the hard data from the transports and what that industry’s view is on the state of the economy.

Have a great evening.

~George

Stocks rose for a 3rd straight week as earnings have encouraged investors, especially from the tech sector. The week ahead promises an even broader picture on the health of the economy with one third of the S&P 500 reporting their earnings results. I will be particlarly interested in what Norfolk Southern (NYSE: NSC) has to say on the state of the rail transportation industry, a key metric in my book that sheds light on economic activity. NSC reports their 3rd quarter results this upcoming Wednesday.

Capping the week on Friday we get our first look at the 3rd quarter G.D.P. numbers. I do not think that anyone is expecting meaningful growth in our economy yet, but any signal of an increase especially from the consumer would be a surprise and would be welcomed. In my most recent posts I elude to the markets potentially double topping, this could be the week that decides whether we have a double top breakout or if the double top stands true to it’s form.

Have a healthy and prosperous week.

~George

We are smack dab in the middle of the 3rd quarter earnings reporting season and I gottta tell you folks if companies don’t knock it out of the park and I mean out of the yard, this market is going to take you lower! Just look at the spectacular earnings results reported by Apple (NasdaqGS: AAPL) which reported all time record earnings for it’s last quarter and yet the stock went below 300 in Monday’s after hours session and subsequently recovered a bit. Or look at the earnings report that IBM (NYSE: IBM) issued after the close on Monday reporting an 18% eps increase and it’s 31st consecutive quarter of earnings growth and yet the stock got a haircut in Tuesday’s trading session. Point being you must blow out your numbers in order for these markets to reward your performance and seemingly there are certain issuers that are indeed priced to perfection.

Which leads me to the question of, is this market getting tired and could it be in the process of double topping? Take a look at the 1 year chart of the S&P 500 index. The S&P is approaching the zone of the April highs and only time will tell if we can break through this double top or if it will serve as one of the catalysts to a leg down in the market. Good luck to all.

~George

Technology shares closed at their highs of the day thanks in large part to Google (NasdaqGS: GOOG) which blew out their 3rd quarter earnings results. I have been looking for other tech names to join Apple (NasdaqGS: AAPL) in leading this market surge. Although quite a different story with the bank stocks which weighed on the Dow today. This ilk has been hammered recently over concerns of the mortgage mess that our country is facing and how this could cost banks billions of dollars in losses and more write downs. I think the biggest fear out there is nobody really knows the magnitude of the losses and whether or not a moratorium will be placed on foreclosures. That in itself could drag the housing market recovery out much longer than anticipated which of course could effect the overall economic recovery as well.

Look there is no easy fix to the mortgage crisis this country faces and it will take time for the enormous amount of current and future inventory to be soaked up. Nonetheless America continues to show resiliency in the most difficult times and I have faith that over time we will overcome and hopefully learn from the mistakes that have been made across the board.

Have a great weekend 🙂

~George

The markets are just about at their highs from the April 26th peak. Is a double top forming or can earnings and the upcoming mid-term elections be catalysts for the continuation of this rally? So far earnings have been a mixed bag, with banks continuing to underperform along with certain chip stocks i.e. Intel (NasdaqGS: INTC) which certainly looked sluggish today. Then of course you’ve got the rock star Apple (NasdaqGS: AAPL) which broke through $300 per share today hitting all time highs and is really one of the main reasons why the Nasdaq continues to lift. It will be interesting to see how business is doing at some of the other tech titans such as Google (NasdaqGS: GOOG), IBM (NYSE: IBM) and Microsoft (NasdaqGS: MSFT) when they begin reporting their 3rd quarter results starting with Google tomorrow.

I would like to see the banks and tech stocks other than Apple join this amazing commodity bull run that is occurring so we can have a more believable and a more broader base rally.

Good luck to all.

~George

The markets continue to lift with the Dow closing above 11,000 last week for the first time since early May. Quite an achievement considering that the U.S. lost more jobs in September than expected and economic growth continues to be sluggish. So why such a disconnect between what’s going on in the labor market, the economy and the stock market? I hate to sound like a broken record but the point remains that as long as the Fed has such an accommodative monetary policy which includes record low interest rates and a commitment to buy treasuries when needed, where else can the cash go? Corporate America for the most part is also contributing to the market strength by continuing to beat earnings expectations by running their companies more efficiently and delivering higher profits to their bottom line. Here’s the problem: with all of this going on hardly anyone else from individuals to small businesses aren’t enjoying the benefits of higher profits and accomplishing new milestones because this tepid recovery is very bias and so far only a few components of the economy are benefiting.

My view is that in order for this stock market to continue to grow while minimizing volatility we must have an economic environment in which everyone is able participate in and benefit from. However, this requires real job growth and absolutely no tax increases amongst other things. My friends, in order for this to happen significant change in Washington must occur and from the looks of things, we are only a few weeks away 🙂

Have a great week.

~George

After a breathtaking September where the markets went up almost 10% for month what could we possibly be in store for in October and for that matter the rest of the year? Two words, extreme volatility! The potential volatility begins this week with some key economic reports hitting the market and with the ever so closely watched employment numbers coming out before the open on Friday. Any surprises there would most certainly jolt the markets in either direction. Then of course we begin to see corporate America report their 3rd quarter earnings results and one might ask with the incredible run the market has been on is it possible that companies can beat earnings expectations in order for this rally to continue? That my friends is the $1 million dollar question and my expectations is this reporting season will be another catalyst for significant volatility in the markets. Last but not least we are a month away from the highly anticipated mid-term elections and one does not need to be a rocket scientist to figure out that this event indeed will ratchet up the volatility as well.

Bottom line, in my humble opinion we are heading into a period that will be a traders dream. I think market technicians are going to have a field day navigating the markets and if you are a long term investor you must have the mental and emotional strength to endure the upcoming period of volatility.

Have a great week 🙂

~George

After a terrible month for the markets in August, I titled my September 1st (blog) “New month – New beginnings” and as I suspected, the sell-off in August was a little overdone. Little did I know. You typically don’t see records set for the month of September for historically September and October tend to be the two worst performing months of the year. For now I think  you can throw the historic data out of the window for we have not seen this type of environment for stocks since the 30’s. My feelings now are buyer beware. When we essentially see a straight line up one must expect pull backs to occur.  A few things that concern me with this enormous rally is that it’s happening for the most part without the bank and financial stocks participating, also the volumes have been light and the market breadth was weak. Again even those metrics may not matter much with what the markets have to digest over the upcoming 3rd quarter earnings reporting season and the ever approaching mid-terms.

Congratulations to all that have been long this market but please make sure you consider how far we have come in such a short period of time.

Best of luck.

~George

I do not believe anyone expected the markets to be up almost a whopping 10% for the month of September. With only one week left we will see how this finishes out but what an incredible run nonetheless. So now what you may ask? Well don’t look now but 3rd quarter earnings reporting season is approaching and you may think how in the heck can companies continue to exceed expectations in such a tepid economic environment? Over the past several quarters companies have been able to beat their eps estimates and increase their bottom line by running their operations more efficiently which includes in part a reduction in their workforce. Well this perma-bull has been looking for top-line growth out of corporate America in order to believe that we are turning a corner in this economy. Odds are we are not going to see this yet so how will the markets react once the S&P and the other bellwethers begin reporting their results? Well considering this increbidle bull run we have been on one has got to beleive we are due for a pull back and maybe they will use the upcoming earnings reporting season as an excuse? If so don’t forget there is still a lot of cash on the sidelines that could come in on such pull backs and the mid-term elections could also play a key factor in placing a floor in the markets.

Whatever the case may be, this October and for that matter the rest of the year will not be for the faint of hearts. I expect volatility to increase for how could it not with such signficant events on the horizon. Best of luck to all.

Have a great weekend 🙂

~George