Historically A Strong Month For Stocks…

December is historically a strong month for the stock market. Many factors play into the last month of the year being a positive one including holiday bonuses, the general overall feeling of optimism and typically lighter volumes due to the holiday season. How we finish out this year will largely hinge on the results of this weekend’s G20 summit. Early indications are that the trade talks and other collaborative measures are going well. As the major averages enter into the last month of the year, The Dow Jones Industrial Average (click here for chart) finds itself at 25,538, the S&P 500 (chart) closed out the month of November at the 2,760 level, the Nasdaq Composite (chart) finished at 7,330 and the small-cap Russell 2000 (chart) finished November at 1,533. On the year, the major averages are barely in the green with the small-cap Russell 2000 actually a tad in the red.

Stocks this past week did get a boost from Federal Reserve Chairman Jerome Powell when Chairman Powell spoke at the Economic Club of New York. Chairman Powell stated that the Fed’s benchmark interest rate was now “just below” the neutral level. This sent the Dow Jones Industrial Average (see chart below) soaring over 600 points on Wednesday. Chairman Powell’s comments are being viewed by the street that the Federal Reserve just might be done raising interest rates for the foreseeable future. Now if we can get some concrete positive news and developments out of the G20 summit which is being held in Buenos Aires, then indeed we could be setting up for a year-end rally.

Let’s take a look at the moving averages technical set-up of the aforementioned key indexes starting with the Dow Jones Industrial Average (chart). At Friday’s close, the Dow is trading above its 200-day moving average by about 400 points while the S&P 500 (chart) closed right at its 200-day. Both the Nasdaq Composite (chart) and the small-cap Russell 2000 (chart) are trading below their respective 200-day moving averages but they have recently cleared and are trading above their 20-day moving averages.¬†So technically speaking things do not look too shabby. Let’s see if we can have a rally into year-end.

Good luck to all ūüôā

~George

Dow Jones Industrial Average - George Mahfouz Jr

Within Striking Distance!

In my previous blog, I said I wouldn’t be at the very least surprised if the Dow Jones Industrial Average (see chart below) closed above 25000 by year end. Well don’t look now, we are in striking distance of that milestone. In fact, if the Dow does close above 25000 by year end, it would have taken it a month to do so. That’s right only a month! In late November the Dow closed above the 24000 mark for the very first time and now its a mere 350 points away from yet another 1000 point gain. What’s impressive about this 1000 point clip is how fast it is getting there, I mean a month? This is unprecedented for sure. Market observers are expecting this insatiable bull market to keep on truckin into the end of the year, especially if the tax bill goes live! The S&P 500 (chart) and the Nasdaq Composite (chart) also closed at records highs on Friday with the S&P 500 closing in on the 2700 mark and the Nasdaq approaching the 7000 mark. The small-cap Russell 2000 (chart) is lagging behind but on Friday the Russell did find support at its 200-day moving average to close higher on the week.

With only 2 weeks left in the trading year what can investors or traders expect? More of the same or a sell the news type event? The news being the proposed tax bill getting through and going live. I truly don’t know? However, when you add seasonality into the mix with December being one of the strongest months for stocks on the year, I would not be surprised if the Dow Jones Industrial Average does indeed eclipse the 25000 mark. We could also see the S&P 500 overtake 2700 and the Nasdaq surpass 7000. Now if there is a snag in getting the tax bill through or if it ends up being a “sell the news” type of event meaning the proposed tax bill does go through by year end, then I will have a much different take heading into the new year. Both Paula and I wish everyone the healthiest and happiest holiday season ūüôā

~George

Dow Jones Industrial Average - Paula Mahfouz

OPEC Doesn’t Budge, Oil And The Energy Sector Tumble!

The Organization of the Petroleum Exporting Countries decided on Thursday not to cut production as many had hoped. This decision sent crude oil and energy stocks tumbling. The overall energy sector fell over six percent on Friday while U.S. crude fell to $66.36 per barrel, a level not seen in over four¬†years. On the bright side however, lower oil prices will ultimately¬†pass through to the consumer, which should¬†be¬†a positive for the overall economy. This¬†may be the reason why the markets in general didn’t see too much pressure last week. For the week, the Dow Jones Industrial Average (chart), the S&P 500 (chart), and the small-cap Russell 2000 (chart) closed¬†essentially unchanged,¬†while the Nasdaq (chart) posted a strong weekly gain of 1.7%.

Friday’s trading session closed early due to the Thanksgiving holiday, so I will be very interested to see how crude oil and the energy sector trades this week as market participants get back to work and normal volumes resume. That said, I am¬†expecting more downward pressure on oil and energy stocks in the near term. Without question¬†the smaller, leveraged and debt-ridden oil and gas companies are¬†in a precarious position, especially those in the exploration stages. These companies¬†may be forced into consolidation or have no choice but to¬†fire-sale¬†part of¬†their asset base in order to reduce debt levels. What I will be looking for in the coming weeks are large and mega-cap energy companies that have had their stock hit, and that have rock solid balance sheets that can weather the storm in this environment.

Despite the volatility the markets have experienced here in the fourth quarter and with crude oil falling sharply, three of the four major averages are still up impressively¬†on the year, with the small-cap Russell 2000 (chart) basically flat. Now that we are in the month of December, I do not see any real headwinds as we close out 2014. In fact, with lower oil, the consumer may be a bit more cheerful as the Christmas holiday season fast approaches. If this is the case, stocks as a whole could end the year on their highs. Have a great week ūüôā

~George