reporting

Will Earnings Take The S&P To All Time Highs?

Posted on by George Mahfouz

Now that earnings reporting season is upon us, will Q1 corporate earnings take the S&P 500 (see chart here) to all time highs? We are about to find out. For the first time in months the S&P 500 (see chart here) closed above the 2900 mark and is now within striking distance of its record close of 2940 set back in September. Once again the markets feel like they are in melt up mode. The Dow Jones Industrial Average (see chart below) closed on Friday at 26412 just 500 points away from its record high, the Nasdaq Composite (see chart here) is approaching the 8000 level a level it hasn’t seen in months, and last but not least the small-cap Russell 2000 (see chart here) is approaching the 1600 level and trading above its 200-day moving average.

The technical shape of the markets also appear to be healthy heading into Q1 earnings reporting season. All of the aforementioned indexes are trading above their 20-day, 100-day and 200-day moving averages. A good sign. Furthermore, none of these averages are in overbought territory this according the the relative strength index. Yet, another good sign.

Back to Q1 earnings reporting season. Although analysts and market pundits expect corporate earnings to have declined this quarter, I will be paying attention to the guidance that companies give. It’s no secret there has bee a global slowdown lately due to a variety of factors. However, if companies give better than expected guidance, then most likely we should indeed see new record highs.

Companies to look out for this week that are reporting are, Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC), Johnson & Johnson (NYSE: JNJ), Netflix (NasdaqGS: NFLX), United Continental Holdings (NasdaqGS: UAL), Abbott Labs (NYSE: ABT), Alcoa (NYSE:AA), Las Vegas Sands, Corp. (NYSE: LVS), PepsiCo, Inc. (NasdaqGS: PEP), American Express (NYSE: AXP) and Honeywell International (NYSE: HON) just to name a few. Let’s see if Q1 earnings reporting season becomes the catalyst for new record highs. Good luck to all 🙂

~George

Dow Jones Industrial Average - Paula Mahfouz

 

 

 

 

What Bear Market?

Posted on by George Mahfouz

The major averages in December entered into bear market territory and seemingly was heading even lower. But lo and behold and fast forward to today and we see that the key indices have all come roaring back.  The definition of a “bear market” is when a stock or an index goes down 20% or more from its highs and that was definitely the case in the second half of 2018. The Dow Jones Industrial (see chart here) is now back over 24,000 after dropping below 22,000 in December, the S&P 500 (see chart here) is back over 2,600 after dropping below 2,400, the Nasdaq Composite (see chart here) is now over 7,100 after hitting a low of 6,190 and the small-cap Russell 2000 (see chart here) it trading above 1,400 after hitting a low in December of 1,267.

The sharp V shaped bounce back in such a short period of time is very impressive. I do not think anyone expected such a sharp rebound in just a month. This surprise move is also happening despite the ever increasing chaos and turmoil out of Washington DC. Is it me or has it gotten to the point of utter disgust with what is happening to our country. I am not much of a political advocate in either direction but the narcissism and antics coming out of DC is unbelievable. What’s more is that they are using the government shutdown as the pawn to get their way, again unbelievable.

Ok enough of that and back to the markets. We are now heading straight into earnings reporting season and to me this without a doubt will be a significant catalyst as to whether or not stocks will continue to rise or pause. Of course any type of meaningful progress with the trade war and China could also play a major role. The Federal Reserve has been more vocal with interest rates and indicating that they are more apt to more of a wait and see approach as to any additional rate hikes in near term. There is a lot at hand here which should determine whether or not this bounce back rally will continue. Good luck to all 🙂

~George

What A Rollercoaster Ride!

Posted on by George Mahfouz

This week started off with the vote no one expected. Global markets were shocked with the outcome of the United Kingdom’s vote to the leave the European Union. Here at home, the Dow Jones Industrial Average (see chart below) lost close to 1,000 points between Monday and Tuesday, the Nasdaq (see chart below) over that same two-day period lost close to seven percent as did the S&P 500 (chart) and the small-cap Russell 2000 (chart). A breathtaking 2-day drop which was so swift and profound that it violated the 200-day moving averages of all of the aforementioned indexes. Fast forward to today and what seemingly was the start of an angry correction, has turned into yet another “buy the dip” opportunity. No matter what the challenges are or have been on the macro-economic or political front, markets over the past several years have shrugged them off. I honestly did not think stocks would snap back this time as quickly and as powerfully as they have.

Yet again, oversold conditions created a trader’s dream with this snap-back rally. Ever since this bull market began, every shocking or unexpected headline which have rattled the markets have always been met with strong support that then turns into the resumption of this protracted bull market. However, it is also very clear that we have been trading in a range for quite some time now and every time we have tried to breakout of this trading range, resistance is met and we retrace back to a variety of moving averages.

So you may be asking how do we break out of this S&P 500 (chart) 2000 to 2120 trading range? One catalyst that can do this is the upcoming second quarter earnings reporting season which kicks off here in July. I do not think that the economy is such that record earnings results will come forward. In fact, companies may take it upon themselves to use the Brexit circumstance to soften their future guidance? We will see. In my humble opinion I think the possibility of a downward break is more probable in the near term than stocks breaking out to all-time highs, especially after this snap back rally. Good luck to all!

Paula and I wish everyone a safe and Happy 4th of July holiday 🙂

~George Mahfouz, Jr.
Dow Jones George Mahfouz JrNasdaq George Mahfouz Jr.