The Dow (chart) and the S&P 500 (chart) closed at their highest point in almost three years while the Russell 2000 (chart) index of small-cap stocks closed the month at record highs. So far so good for Q1 earnings reporting season which is now past the half-way mark. Many companies in a broad array of sectors from commodities to industrials to technology have exceeded their earnings estimates and in some instances provided strong forward looking guidance. Also, we talked technicals the other day (blog) and now seemingly both the S&P 500 (chart) and the Nasdaq (chart) have broken out of a double top formation.

Instinctually you may think how in the world can these markets continue to lift with gas prices in many states now exceeding $4.00 per gallon and joblessness still abound? There are several arguments the bulls and the bears are presenting as to what lies ahead for equites but one thing is for sure, right now there is an insatiable craving for risk and the momentum of commodities and equities alike have become parabolic. Congratulations to all of you bulls out there and as for the bears, one has got to believe at some point and time a healthy pullback lies in the cards.

Enjoy the weekend 🙂

~George

Now that the Q1 reporting season is about half-way through, let’s look at the four key indexes and how they are shaping up technically. The Dow Jones Industrial Average (chart); after hitting multi-year highs last week, it appears that the Dow is not yet in an overbought condition at least according to the Relative Strength Index also known as the RSI. Certain market technicians look for a reading above the 70 value before they consider that an index or equity is overbought. The S&P 500 (chart); the same rings true here with the S&P and the RSI value, however an interesting formation is potentially occurring in the form of a double top with the possibility of double top breakout, should the S&P break above the 1340 area and stay above it. The Nasdaq (chart); has almost the identical set-up as the S&P 500 and last but not least the Russell 2000 (chart); the leading small cap index remains above its 50 day moving average and appears to be consolidating in the 840 area.

So you ask “what does all of this mean”? Technically speaking all of these indexes are indeed trading above their 50-day moving averages and seem to be in some sort of consolidation mode. Q1 earnings for the most part have been very impressive which has helped sustain the bull market status quo. One technical I will be looking for is if the S&P and Nasdaq can break out of their double top formations and continue their upward trajectories. If this happens we could be in for more upside to this market. Good luck to all.

Have a very prosperous week.

~George

Equities got a boost this week from stronger than expected earnings reports out of Intel (NasdaqGS: INTC) report, United Technologies (NYSE: UTX) report and Apple (NasdaqGS: AAPL) report, just to name a few. This helped lift the Dow Jones Industrial Average to multi-year highs (chart).

If you are a bull, this is a much welcomed sight especially after last weeks earnings reports from Alcoa (NYSE: AA) and Google (NasdaqGS: GOOG). These companies came in under what the street was expecting and created some concern over the rest of this earnings reporting season.

Next week there will be no shortage of action as we continue to hear from corporate America and navigate through Q1 earnings.

Enjoy the holiday weekend 🙂

~George

The death of the personal computer has been greatly exaggerated. This was confirmed by Intel’s (NasdaqGS: INTC) record quarter which the company reported yesterday after the close. The company’s shareholders were rewarded today with Intel’s stock closing up 7.80% at $21.41 (chart). The stock also soared past its 50 day and 200 day moving averages, which certain market technicians pay attention to and act upon.

The pundits have been claiming that the P.C. market is being cannibalized by the proliferation of the latest craze in tablets, especially the iPad. One of the factors these experts have failed to consider is how much P.C. demand there is in the emerging market space and the rest of the world for that matter.

That said, Apple (NasdaqGS: AAPL) just reported their earnings after the close today and they too blew out their quarter with revenues up an astonishing 83% reporting a net profit of $5.59 billion. The growth of Apple and the demand for its products  is simply unbelievable. It appears that this bull market has more room to run.

~George

The markets on Friday got a lift from strong economic numbers out of the manufacturing sector along with a tame inflation report. This data helped calm investors nerves from the disappointing earnings results provided last week by Alcoa (NYSE: AA) results, JPM Chase (NYSE: JPM) results, Google (Nasdaq:GOOG) results and Bank of America (NYSE: BAC) results. As you peruse their earnings results, seemingly all of these companies had relatively strong quarters. However, expectations are so high and stock prices have lifted in anticipation of Q1 results, companies really need to outperform in all areas of their balance sheets.

That said, a look ahead to this upcoming week will provide further insight into the health of corporate America. Earnings results are scheduled to come out of the likes of Citigroup (NYSE: C), Eli Lilly (NYSE: LLY), American Express (NYSE: AXP), Apple (NASDAQ: AAPL), General Electric (NYSE: GE) and McDonalds Corp (NYSE: MCD) just to name a few. So hang on to your hats for this upcoming week should be a doozy.

Have a very prosperous week 🙂

~George

After the close Google (NasdaqGS: GOOG) reported their first quarter earnings and the company once again grew at an impressive double digit rate with profits up over 17%. Unfortunately, that was not enough for the street as Google’s stock is currently down over $30 per share in the after hours trading session. This is another example of a widely followed  company not exceeding analysts expectations as was the case with Alcoa (NYSE: AA). Alcoa reported their earnings earlier this week and also did not meet analysts expectations. Alcoa’s stock has lost over 6% of its value since reporting and based on the after hours action, Google may follow suit.

So now what? A flood of earnings reports will be coming out over the next few weeks and what has happened to Alcoa’s and Google’s stock price proves out my earlier concern over the weekend (blog). It is clear now that if companies are not demonstrating significant top-line growth, the street will be unforgiving. Hopefully this is not the beginning of a bearish trend in equities but also make sure to protect your profits.

~George

Alcoa (NYSE: AA) reported their earnings after the close yesterday and the market punished it today (chart). In Sunday’s (blog) I eluded to the fact that companies cannot afford to miss their mark and even though Alcoa had a very strong quarter with revenue coming in at $6b, the revenue number came in below analysts expectations of $6.3b.

So what could this mean for the rest of the companies that have yet to report? Bluntly, stocks can and will get hammered when expectations are not met. In fact, I believe that if companies do not far exceed expectations or do not provide strong guidance, their stocks can also be taken out to the cleaners such as what happened to Alcoa today. This could of very well been an overreaction in today’s price action of Alcoa’s stock, for when you read the highlights of their earnings report, this company is seemingly knocking it out of the park.

One thing is for sure, this earnings reporting season will not be for the faint of heart. Stocks seemed to be priced to perfection and if Alcoa is any indication, companies better blow out their numbers if they want to be rewarded by the street.

Have a good evening.

~George

Now that the U.S. government has averted a shutdown, all eyes will be on the 1st quarter earnings reporting season which begins in earnest tomorrow. One of the companies that can provide a snapshot regarding the overall health of the global economy is aluminum producer Alcoa (NYSE: AA) which will report on Monday after the bell. Also from the banking sector both JP Morgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) are schedule to report this week. Finally, tech titan Google (NasdaqGS: GOOG) is scheduled to release its earnings results on Thursday after the close.

Needless to say, we have a very important week ahead that will most likely set the tone for the rest of the companies due to report in April. Analysts are expecting yet another quarter of better than expected earnings results and with the way the markets have elevated over the past several months, companies cannot afford to miss their mark or provide tepid guidance.

Good luck to all.

~George

Despite oil surging past $112.00 per barrel today and the United States government potentially shutting down, the Dow actually finished the week slightly up (chart), while the S&P 500 (chart) and Nasdaq (chart) both finished the week modestly lower. I know this sounds like a broken record but the markets simply refuse to go down. Between the ongoing geopolitical turmoil in the Middle East and North Africa, crude oil making new 52 week highs, the tragedy in Japan and now a pending U.S. government shutdown, one would think we would be in the middle of a significant correction, right? I don’t completely get this however I do know better than to fight the tape or to stand in front of a freight train! My friends this has to go down as one of the most resilient bull markets in history! Next week kicks off first quarter earnings reporting season so I am expecting volatility to come back into stocks over the next several weeks.

Have a wonderful weekend 🙂

~George

Since the beginning of this indomitable bull market run one of the quiet leaders has been small-cap stocks. Typically small-caps are at the forefront in the beginning stages of a bull market, however this class continues to surge. Small-caps also carry a much higher degree of risk, hence much greater potential returns. Let’s look at chart of the Russell 2000 chart. At the market depths in March 2009 the Russell traded below 350 before bottoming out. Since then this bellwether small-cap index has returned an astounding 142%.

Even the most speculative equities that trade on the bulletin board continue to see inflows of significant capital despite having the highest degrees of risk. So what does all this mean? Some market historians believe that too much speculation in the marketplace is a tell tale sign of equities overheating. From my perspective, no matter what the metrics or statistics are, prudent risk management is essential in any market and never invest with money you can’t afford to lose.

All the best.

~George