Red Week For Stocks, Technicals In Play…

Stocks had a tough week pressured by the prospects of rising interest rates and political turmoil out of Washington D.C. On the week, the Dow Jones Industrial Average (see chart below) closed lower by 1.5%, the S&P 500 (chart) closed the week down 1.2%, the Nasdaq Composite (chart) finished lower by 1% and the small-cap Russell 2000 (chart) ended the week down around 1% as well. Despite a choppy and red trading week, all of the aforementioned indexes are still up on the year.

As we celebrate St. Patrick’s Day we find ourselves in a period of no real short term catalysts to steer the market in either direction other than the FOMC meeting next week. I don’t expect the Federal Reserve to surprise the markets with a larger than expected interest rate hike or change their view on interest rate policy this year. The inflation data continues to remain tame although the labor market is heating up. So what is going to drive stocks between now and Q1 earnings reporting season in April?

When we find ourselves in a period such as the one we are in, I focus in on the technical shape of the markets. And as you can see in the charts of the major averages, all of them are at their moving averages support. Whether it’s the 9 day, 20 day, 50 day, 100 or 200 day moving average, stocks and indexes typically respect and is supported by moving average support lines with the 200 day moving average being the most reliable out of all of them. This doesn’t mean that this favorite technical indicator of most market technicians is infallible, but it sure has a history of being an effective tool when navigating the markets. All things considered, including the seasonality of the markets, I do expect that these support levels should hold at least until Q1 earnings reporting season. If the moving averages don’t hold, then I would not be surprised if we revisit the early February market correction lows. Good luck to all and Paula and I wish everyone a safe and Happy St. Patricks Day 🙂


Dow Jones Industrial Average - Paula Mahfouz

Volatile start to November…

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 🙂