earnings reporting season

Finally Congress Gets a Deal Done!

Posted on by George Mahfouz

After 16 days of a partial government shutdown, Congress finally came to terms to reopen the government and raise the debt ceiling. Talk about waiting until the last minute! Needless to say, stocks over the past couple of weeks have experienced an increase in volatility with triple digit gains and losses during the shutdown. Despite the turmoil in Washington, the Dow Jones Industrial Average (chart) on Wednesday closed up over 200 points, the Nasdaq (chart) managed to close at a 13 year high, the S&P 500 (chart) is nearing its all time high and the small-cap Russell 2000 (chart) finished the trading day at an all time record. Now the street can focus on Q3 earnings reporting season and so far, not so good.

After the close yesterday, bellwether International Business Machines (NYSE: IBM) shocked the street by missing revenues by almost $1 billion dollars and is down nearly seven percent in pre-market trading. Also after the close yesterday, Ebay (NasdaqGS: EBAY) reported in-line revenues, however guided lower for the upcoming holiday season. With Q3 earnings reporting season kicking into to high gear, I am questioning whether or not this will become the trend for the quarter? Most analysts do not expect this to be a robust quarter for corporate America, so now the question becomes does the imminent pullback in stocks become a buying opportunity before year end? Quite frankly with the headline risk out of Washington seemingly over for now, I beleive that the trend of pullbacks being bought will continue between now and year-end. I will look at key technical support levels for possible entries, and on the S&P 500 (chart) the 1680 zone appears to be the first level of support, which also happens to be its 50-day moving average, followed by the 1620 area. What gives me this vote of confidence of a continuing bull market into year-end is not necessarily how corporate earnings will fair, but the fact that the Federal Reserve continues to promise that it will do whatever it takes to support the economy, hence the bull market should continue. That said, when the Federal Reserve begins to taper, this will be the time that corporate America will truly need demonstrate top-line growth. In closing, no matter how your portfolio is positioned, it is usually the best practice to implement some type of protective stop initiative and of course always consult with a certified financial professional(s) while considering any investment strategy. Good luck to all. 🙂

~George

 

Despite a modest pullback in June, the major averages continue to post double digit gains on the year…

Posted on by George Mahfouz

In month of June, the key indices witnessed a spike in volatility and their first monthly drop in 2013, however, stocks in the second quarter once again posted impressive gains. In Q2, the Dow Jones Industrial Average (chart) finished up 2.27%, the Nasdaq (chart) +4.15%, the S&P 500 (chart) +2.36% and the small-cap Russell 2000 (chart) closed the quarter up 2.73%. So far this year these averages are up an eye-popping 13.78%, 12.71%, 12.63% and 15.09% respectively.

As I look back over the past month or so volatility kicked into high gear as the Fed continued to signal that its bond purchases would relent as early as the fourth quarter of this year. Couple that with Japan’s Nikkei index dramatically declining over 20% in less than a month from its recent high, and the gold market (chart) getting taken out to the woodshed with gold having its worst quarter on record, losing over 24% on the quarter. It’s no wonder the key indices retraced in June. In fact, I am surprised that our averages did not decline any further considering all of the facts.

So what now you may ask? How does the second half of the year portend to be? Here is the catch-22. As economic numbers continue to improve, this will give the Fed more reason to begin to lighten up on their bond purchases, hence more market volatility. However, if the economy continue to grow anemically, this will give the Fed the green light to keep stimulating. What’s wrong with this picture though? In my opinion, at some point in time our economy will have to stand on its own two feet and the top line of corporate America will have to show meaningful growth in order for this bull market to continue. We won’t have to wait very long to understand the health and growth prospects of corporate America as Q2 earnings reporting season kicks into gear here in July. That said, as a trader you relish in the opportunities that earnings season provides both on the long and short side. However, make sure to abide by your trading plans, disciplines and always consider using protective stops as part of your plan. Earnings reporting season typically adds to volatility and larger than expected price movements. I bid you good luck.

All the best 🙂

~George

Unconditional support continues…

Posted on by George Mahfouz

The Federal Reserve’s incessant support of asset prices continues to propel stocks to all time highs. The S&P 500 (chart) closed out the month of April at a record high of 1597.57. For the month, the Dow Jones Industrial Average (chart) closed up 1.79%, the Nasdaq (chart) +1.88% and the small-cap Russell 2000 (chart) finished the month gaining about 1%. Records are being broken despite the lackluster job growth in our country, a weaker than expected GDP report issued last Friday, and a mixed bag of Q1 corporate earnings reports.

Not to sound like a broken record, but as long as the economy stays stuck in neutral, QE3 should remain in full effect, which is what I expect to hear when the Federal Reserve concludes their two day meeting this afternoon. This mantra should also continue to be bullish for stocks and act as a catalyst for support should we get the pullback or market correction that the bears have been chatting up all year long. To add even more fuel to the fire, you now have central banks from around the world opening up their balance sheets in further support of their own economies. I am not so sure that the old adage of “sell in May and go away” will apply this year just from the mere power and seemingly collaborative efforts of the world wide central bankers. Logically, this cannot continue to be the case, but for now it is super charging the markets.

Technically speaking and from a relative strength perspective, the four key indices are below the 70 value level of the RSI which is considered overbought territory, and therefore could very well be consolidating for the next leg up. Of course, the market is way overdue for some type of pullback. I have been expecting this for months now and whenever there is any type of selling pressure, it has been met with undeniable support. Best of luck in the month of May and remember it is typically a good idea to use protective stops in any position you enter into especially with the amazing double digit run stocks have had so far this year.

Have a great May 🙂

~George

 

 

Q1 in the books, and what a quarter it was!

Posted on by George Mahfouz

Stocks posted one of their largest percentage quarterly gains in years. In the first three months of 2013, the Dow Jones Industrial Average (chart) soared 11.3%, the Nasdaq (chart) gained 8.2%, the S&P 500 (chart) posted a record close to end the Q, and the small-cap Russell 2000 (chart) produced a staggering 12% gain. Who would have thought that the major averages would have such a stellar performance to start the year? Especially when considering the sequester ramifications, the Cypress crisis and the mixed signals that the economy here has been sending.

Now that Q1 is over, will there be an encore performance in Q2? Well we won’t have to look very far but to the much anticipated earnings reporting season which begins next week. In my humble opinion, this Q1 earnings reporting season will be scrutinized like no other. If companies do not demonstrate meaningful top-line growth, this rally could indeed be challenged. At least, this is what logic would say. If you are a perma-bull, I suppose you could surmise that if earnings season turns out as a disappointment, this would give the Fed even more reason to continue its easy monetary policies. Let’s not forget that these policies are why we are breaking records seemingly everyday. There is no denying this bull market has been mainly fed by the stimulus programs the Fed (no pun intended) has implemented over the past four years or so. Sure, a lot of companies were forced to become more efficient during our own economic crisis but at some point in time, the top-line must grow and these markets must be able to stand own their own two feet. The real challenge that the Fed will ultimately face is how to begin to wind down its $85 billion a month bond buying program without rattling the markets. To me, if not handled properly and delicately, this would be the most powerful catalyst to stop this bull market right in its tracks.

Technically speaking, all of the key indices remain extended and near the 70 value level of the Relative Strength Index (RSI). I will remain extremely cautious in the near term when deploying any new capital into the markets especially on the long side. I do, however, expect volitlilty to increase due to the upcoming earnings reporting season. Good luck to all and have a very profitable month.

All the best 🙂

~George

It’s parabolic!

Posted on by George Mahfouz

Stocks remain on fire in January as most of the major averages are hitting multi-year highs, and in some instances all time highs! For the week, the Dow Jones Industrial Average (chart) closed up 1.8%, the Nasdaq (chart) +0.48%, the S&P 500 (chart) +1.14% and the small-cap Russell 2000 (chart) finished the week higher by 1.39% and closing at an all time high. Once the S&P 500 was able to breakout and remain above the 1475 level, which had been a major resistance level, the money that had been sitting on the sidelines seemingly went to work. Also there has been a slow rotation out of bond funds and into stocks.

One would thing that a pullback of some sort is in the cards for equities. However, with earnings reporting season coming in better than expected so far, and the debt ceiling issue being pushed out, we may very well continue to see this upward trajectory for stocks at least in the short term. There could be one catalyst that may give the market a pause and that is next weeks jobs report. If the employment picture continues to remain weak, I would think that this could be a reason for stocks to take a breather.

In addition to the January jobs report released next week, we will also get earnings reports out of Caterpillar (NYSE: CAT), Yahoo (NasdaqGS: YHOO), Ford (NYSE: F), Amazon (Nasdaq: AMZN), Facebook (NasdaqGS: FB), Mastercard (NYSE: MA) and ExxonMobil (NYSE: XOM) just to name a few. Good luck to all.

Have a great weekend 🙂

~George

 

Post election drubbing!

Posted on by George Mahfouz

Stocks were slammed this week after the results of the 2012 presidential and congressional elections. In fact, it was the worst performing week for equities in months. The Dow Jones Industrial Average (chart) lost 2.1%. The Nasdaq (chart) -2.6%, the S&P 500 (chart) -2.4% and the small-cap Russell 2000 (chart) finished the week lower by 2.4%. With the election producing essentially no change in Washington, fears of the fiscal cliff playing out and much higher taxes took center stage and sent the markets spiriling. Furthermore, all of these bellwether indexes are now trading below their respective 200-day moving averages. For most market technicians and certain institutional investors, the 200-day moving average is a key technical metric that is relied upon as to the future direction of stocks or indexes. Personally, I would need to see several days of trading and closing below the line in order for me to completely change my view of where stocks may be headed.

Now that the election is behind us, we can all now begin to focus on not only what Washington will or will not do, but what really is happening behind the scenes of the economy and corporate America. Q3 earnings reporting season is winding down and as expected corporate profits have been affected by the slowing global economy. Between now and year end, I will be paying much closer attention to the economic numbers here and abroad, and even closer attention to the underlying technicals of the markets, which are beginning to show some cracks. As previously stated, in my view a couple of days of the indexes trading below the 200-day does not concern me too much, however, if we see a repeat performance next week with stocks continuing to decline, we very well may be in for a meaningful reversal that the bears have been waiting on. Good luck to all.

Have a great weekend 🙂

~George

Volatile start to November…

Posted on by George Mahfouz

The markets kicked off the month of November on Thursday with a 1% gain only to give it back the very next day. The Dow Jones Industrial Average (chart) finished the shortened trading week essentially flat -0.11%, the Nasdaq (chart) -0.19%, the S&P 500 (chart) -0.16% and the small-cap Russell 2000 (chart) -0.14%. Without question the jittery start to November can be attributed to the upcoming election on Tuesday and the mixed signals from corporate America as companies continue to report their Q3 results.

Despite the increase in volatility, economic reports out this past week from consumer confidence to manufacturing showed signs of improvement. Even the labor market showed an increase in the number of new hires in the month of October. That said, it’s certainly easy for these metrics to be overlooked considering what’s in store next week. Once the Presidential and Congressional elections are over, I think all market participants can once again focus on the fundamentals of the economy, corporate America and the direction the country will go into with the newly elected officials in place.

Let’s not forget about Q3 earnings reporting season which will continue next week with reports coming out of the likes of Humana (NYSE: HUM), News Corp. (NasdaqGS: NWSA), Qualcomm (NasdaqGS: QCOM) and Walt Disney Co (NYSE: DIS) just to name a few. Good luck to all.

Have a great weekend 🙂

~George

Tough week for stocks…

Posted on by George Mahfouz

Earnings reporting season is in high gear and the markets are not liking what they are seeing. For the week, the Dow Jones Industrial Average (chart) fell 1.77%, the Nasdaq (chart) -0.59%, the S&P 500 (chart) -1.99% and the small-cap Russell 2000 index (chart) declined 2.89%.

For the most part, corporate America continues to show a slowdown in their businesses and companies are also providing tepid outlooks in the near term citing the uncertainty of the pending fiscal cliff, and the expiration of the Bush era tax cuts. Even tech-titan Apple (NasdaqGS: AAPL) guided with an outlook that caught the street off guard. Despite the disappointing earnings reporting season so far, the key indices have managed to remain above their respective 200-day moving averages. The 200-day is one of the most closely watched key technical support indicator that market technicians and institutional investors respect.

Next week, Q3 results will continue to pour in so I expect that the 200-day will once again be tested. If this is the case, and this key technical level can hold, we just may make a run into the end of the year? Good luck to all.

Have a great weekend 🙂

~George

Chalk one up for the bears…

Posted on by George Mahfouz

Stocks notched their worst performing week since the beginning of the summer. For the week, the Dow Jones Industrial Average (chart) closed down 2.07%, the Nasdaq (chart) -2.94%, the S&P 500 (chart) -2.21% and the small-cap Russell 2000 (chart) closed out the week down 2.35%.

This upcoming week promises to be a doozy with Q3 earnings reporting season kicking into high gear. The following is a list of some of the high profile companies that are scheduled to report; Citigroup (NYSE: C), Goldman Sachs (NYSE: GS) Coca-Cola ( NYSE: KO), International Business Machines (NYSE: IBM) , Intel (NasdaqGS: INTC), CSX Corp. (NYSE: CSX), Bank of America (NYSE: BAC), US Bancorp (NYSE: USB), American Express (NYSE: AXP) and tech titans Ebay (NasdaqGS: EBAY) and Google (NasdaqGS: GOOG).

With last week’s market performance and lack thereof, the question I am now pondering is whether or not this earnings reporting season will be the catalyst to take the markets down further? Even with last week’s 2% pullback, the bellwether indexes are still up double digits on the year. There indeed could still be more room to the downside, however, I would expect that key technical levels would support any meaningful pullback. Let’s take a look at the S&P 500 (chart). The first level of support appears to be in the 1400 zone and then the 1370 area which happens to be the 200-day moving day average for the S&P. By no means am I suggesting that these levels will be reached, all I am saying is if Q3 earnings reporting season comes in weaker than expected, we could see a continuation of last week’s pullback.

Good luck to all.

Have a great week 🙂

~George  

 

A positive week for stocks, next up Q3 earnings…

Posted on by George Mahfouz

The market posted its first weekly gain in almost a month, this right before earnings reporting season begins. For the week the Dow Jones Industrial Average (chart) finished up 1.29%, the Nasdaq (chart) +0.64%, the S&P 500 (chart) +1.41%, and the small-cap Russell 2000 (chart) closed the week up 0.65%.

Third quarter earnings reporting season will be the highlight next week with earnings reports coming out of Alcoa (NYSE: AA) Yum Brands (NYSE: YUM) and JPMorgan Chase & Co (NYSE: JPM), just to name a few. Most analysts have ratcheted down their earnings forecasts due to the tepid pace of global growth and the number of companies that have pre-announced to the downside. The big question now is, are these adjustments already priced into equities and indexes? My feelings are that if there are any big surprises to the downside and stocks sell-off, that fund managers and institutional buyers are sitting on the sidelines ready to act. We cannot forget the position of the Fed which essentially gives this class of investors the green light to deploy capital into the markets. Of course there are no guarantees that this will be the mandate, however, odds are that any significant sell-off due to earnings reporting season would be met with support. Good luck to all.

Have a great weekend 🙂

~George