There is an interesting development going on right now with the Dow Jones Industrial Average, the S&P 500, the Nasdaq and their small-cap brethren the Russell 2000. When you look at the charts of the Dow chart, S&P 500 chart and the Nasdaq chart, these indexes are close to or at a double top formation pattern. In short, a double top from a technical analysis standpoint is two successive rises to the same price zone. If the double top pattern holds true to form, this could mean a reversal of the upward trend and a subsequent pullback.

Now let’s take a look at the Russell 2000 index chart of small-cap stocks. Here the Russell 2000 established a double top pattern and then broke through it and has continued to move higher. It will be interesting to see if  the “Big 3” bellwether indexes can follow suit? What probably will be the deciding factor in whether or not the Dow, S&P and Nasdaq will breakout or for that matter breakdown, is the upcoming first quarter corporate earnings reporting season which is about to begin.

Have a safe and prosperous week.

~George

Despite worldwide turbulence ranging from the Middle East to the Far East, equities in the first quarter demonstrated how resilient they truly are. The Dow Jones Industrial Average chart had a whopping gain of 6.4%, the S&P 500 chart lifted 5.4% and the Nasdaq chart advanced 4.8%.

Is there a Q2 encore performance? Well so far so good! This morning the March jobs report was released and the economy added 216,000 jobs with the unemployment rate falling to 8.8%, a 2-year low. What’s more is that the hiring all came from the private sector which is a very encouraging sign. For the second straight month the private sector is responsible for the majority of new jobs. The pace of job growth is still relatively slow in comparison to the 450,000 jobs or so needed per month to make a real dent in the unemployment rate. Nonetheless, a much welcomed sight.

All eyes now are on the upcoming Q2 earnings reporting season. The pundits are expecting corporate earnings as a whole to contract a bit, however with the private sector showing signs of life, just maybe corporate earnings are continuing to grow and hopefully from the top-line. Earnings reporting season is most always a very volatile period and if you are long this market one way to protect your holdings is by initiating a protective put a.k.a. a married put on your holdings or on the indexes. Protective puts act like an insurance policy on your long position(s) and defends against a drop in the share price of an underlying stock or index. This strategy is something to consider especially during times of uncertainity and volatilty.

Have a great weekend 🙂

~George