technical shape

$7.4 Billion In One Day!

Posted on by George Mahfouz

The consumer is alive and well which is evidenced by a record $7.4 billion in online sales in one day. Black Friday set a United States record for online sales and between Thanksgiving Day and Black Friday over $11 billion in online sales rang the register. Well it’s not that hard to believe when all that the stock market has done this year is set record after record. As we enter the last month of the year, the Dow Jones Industrial Average (see chart here) is trading above 28000, the S&P 500 (see chart here) starts December near an all-time high, the Nasdaq Composite (see chart below) is also near an all-time high and the small-cap Russell 2000 (see chart here) also has hit its stride breaking out above a triple top that has formed over the past few months.

I have been writing my blog for almost 10 years and I thought years one through five of the recovery from the depths of the 2008 financial crises was impressive. What’s even more impressive to me is that over the past year or so we keep setting record after record despite having one of the most unstable governments in our history. Who would have thought that with a pending impeachment, a trade war with China and tape bomb after tape bomb hitting the tape we would still be at or near record highs? Simply incredible! With that said, the Federal Reserve has done its part this year by reducing interest rates which is probably one of the main reasons the markets still remain at or near record highs.

The technical shape of the stock market appears to still be intact. Despite reaching overbought conditions last week, Friday’s pullback brought the RSI level of the aforementioned indexes back below the 70-value level. The relative strength index is a technical indicator that expresses overbought and/or oversold conditions. The 70-value level of the RSI is considered overbought while the 30-value level is considered oversold. The major indexes all traded above the 70-value level until the most recent pullback. Even if we see a meaningful pullback here in December, there are plenty of support levels that will come into play with the 20-day, 50-day, 100 and 200 day moving averages which are all below where we are trading at today and historically acts as support in sell-offs.

Good luck to all 🙂

~George

$7.4 Billion In One Day! - Paula Mahfouz

Strong Economy Equals A Strong Stock Market!

Posted on by George Mahfouz

The economy posted a 3.2% gain in the first quarter and as the saying goes, a strong economy equals a strong stock market! Is it any wonder as to why the Nasdaq Composite (see chart here) hit an all-time high on Monday! The same rings true with the S&P 500 (see chart below). The S&P 500 hit an all-time high on Monday as well. Now the Dow Jones Industrial Average (see chart here) has a bit more work to do in order to tap its own record as does the small-cap Russell 2000 (see chart here). However, I am sure the bulls will take 2 out of the 4 major averages setting all time highs. What is also helping the stock market is how the Federal Reserve has taken a cautious approach to raising rates any further. In fact, there are calls out of Washington DC asking the Fed to start lowering rates to stimulate the economy even further. Now I am not so sure that the Fed will accommodate Washington’s request, but I do think it is safe to say that we should not see a rate hike in the near future or maybe not at all for the rest of this year.

One note of caution to me is that with nearly half of corporate America reporting their Q1 earnings so far, we are seeing on average a year over year decline in earnings. There are still 100’s of companies set to report over the coming weeks but if this trend continues, this will be the first year over year decline in corporate earnings in years. I will be keeping an eye on this development.

The technical shape of the aforementioned indexes remain intact. The Dow, Nasdaq, S&P 500 and the Russell 2000 all are trading above their respective key moving averages. However, both the Nasdaq Composite (see chart here) and the S&P 500 (see chart here) have entered into overbought territory according to the relative strength index also know as the RSI. That said, I would not be surprised to see at the very least some consolidation or an outright healthy pullback. Good luck to all 🙂

~George

S&P 500 - Paula Mahfouz

Strong Earnings Results Buoy Stocks!

Posted on by George Mahfouz

Q1 strong earnings results buoy stocks! Corporate profits for this past quarter have exceeded expectations. On average corporate earnings growth surpassed 20 percent for the quarter however, it appears that the markets have priced in this impressive growth. For the most part stocks have had a muted response to their earnings results so far this year. The S&P 500 (chart) is barely up on the year. The Dow Jones Industrial Average (chart) finds itself essentially flat with the Nasdaq Composite modestly up (chart), however, the small-cap Russell 2000 (chart) quietly hit an all time high today. Interestingly enough when small-cap stocks are outperforming the other bellwether indexes, it’s usually a good sign for a rest of the market. We will have to see if history repeats itself here.

Yes the markets as a whole may not be up that much this year, but I am impressed with how the overall landscape has held up. The pending trade war with China, the on again and off again tensions with North Korea and rising interest rates have yet to really take hold of these markets in a negative manner. Yes we did experience a 10% sell-off in February but only to be met with support and a resumption of the upward bias towards stocks. That said, I do feel the markets are teetering on the potential of another pullback. Let’s take a look at the technical shape of the aforementioned indexes.

The Dow Jones Industrial Average (chart) closed just under its 100-day moving average at 24714, S&P 500 (chart) is on the other side of that coin closing just above its 100-day moving average at 2720, the Nasdaq Composite (chart) closed at 7382 and as previously mentioned, the small-cap Russell 2000 (chart) notched an all time high today breaking out of a triple top closing at 1625. So technically speaking these key indexes are not in any type of extreme condition either overbought or oversold and we will have to see how the balance of earnings reporting season plays out and whether or not we break out to the upside or have another retracement. Good luck to all 🙂

~George