Month: July 2012

Whatever it takes…

Posted on by George Mahfouz

That was the message sent mid-week by European Central Bank President Mario Draghi. That statement alone was enough to spike the markets into a breathtaking three-day rally pushing the Dow Jones Industrial Average (chart) above the 13,000 mark for the first time in since early May. For the week, the Dow Jones Industrial Average (chart) finished up almost 2%, the Nasdaq (chart) +1.12%, the S&P 500 (chart) +1.71% and the Russell 2000 (chart) +0.56%.

As a trader or investor it has become somewhat challenging to form a thesis on the markets. Despite weakening economic data and tepid corporate earnings, equities continue to outperform the data. Logically, one could surmise based on the weak data and somber outlook, a short thesis could be developed and implemented. However, when you have the central banks from around the world ready to provide consistent stimulus measures, and have a “whatever it takes attitude”, equities benefit.

I am not sure how much longer these stimulus resolutions will have a positive effect on stocks, however, if you try to short this market in this environment, make sure you have protective stops in on all of your positions. Good luck to all.

Have a great weekend 🙂

~George

Nothing too spectacular, so far…

Posted on by George Mahfouz

Earnings reporting season went into overdrive last week and quite honestly the markets were a lot quieter than I expected. For the week, the Dow Jones Industrial Average (chart) gained a modest 0.36%, the Nasdaq (chart) +0.58%, the S&P 500 (chart) +0.43% and the Russell 2000 (chart) actually pulled back 1.18%. So far earnings have come in rather tepid with a few exceptions. Also, volumes on the key indices have been relatively low which is playing a role in the lack of volatility. Technically speaking, nothing is standing out either. The major averages remain above their 50-day moving averages and also remain locked in their multi-week trading ranges.

Next week the financial world will be looking at Apple (NasdaqGS: AAPL) to see how their quarter fared. Apple has the ability to move the entire tech sector and the overall market for that matter, so I will certainly be keying into what the company reports financially, and what the tone is in their earnings conference call. Another highly anticipated earnings report next week will come from Facebook (NasdaqGS: FB). After a disastrous IPO, the street will be looking to see if the company has found its footing or if there is more downside to come. Let’s not forget about the other 750 companies that are reporting next week as we enter into the height of the Q2 earnings reporting season. Good luck to all.

Have a great weekend 🙂

~George

Next week promises to be a doozy…

Posted on by George Mahfouz

Stocks closed the week with a bang, but that’s nothing compared to what’s in store next week. Between dozens of companies reporting their Q2 results, and Ben Bernanke speaking before Congress on Tuesday and Wednesday, I am looking for a spike in volatility that may last all week long. Yesterday, the Dow Jones Industrial Average (chart) closed up 203.82 points, the Nasdaq (chart) +42.28, the S&P 500 (chart) +22.02 and the Russell 2000 (chart) +11.37. With all that’s in store next week, I am also looking at the technicals to see if these key indices can breakout of their respective trading zones. What was impressive to me yesterday is that all four indices either held, or moved and closed above their 50-day moving averages.

With earnings reporting season kicking into high gear, I would expect that this will be the catalyst to whether the markets breakout or breakdown. On Monday all eyes will be on Citigroup (NYSE: C), followed by reports out of Goldman Sachs (NYSE: GS), Intel (NasdaqGS: INTC) and Yahoo (NasdaqGS: YHOO) on Tuesday. Wednesday we will hear from Bank of America (NYSE: BAC), U.S. Bancorp (NYSE: USB), American Express (NYSE: AXP) and eBay (NasdaqGS: EBAY), just to name a few. Closing out the week, Q2 earnings reports will be issued from Morgan Stanley (NYSE: MS), Phillip Morris (NYSE: PM), Google (NasdaqGS: GOOG), Microsoft (NasdaqGS: MSFT) and General Electric (NYSE: GE).

So as you can see, next week should indeed be a doozy! Good luck to all and happy trading 🙂

~George

June jobs report puts the brakes on the market…

Posted on by George Mahfouz

Once again a disappointing jobs report issued on Friday sent stocks lower. The Dow Jones Industrial Average (chart) closed down 124.20 points, the Nasdaq (chart) -38.79 points, the S&P 500 (chart) -12.90 points and the Russell 2000 (chart) -10.29 points. Markets were lower on Friday due to the lack of job growth that continues to plague the economy. For the month of June, the private sector only added 80,000 jobs compared to the 90,000 jobs economists were expecting. Even if the 90,000 mark was met, I still believe equities would of sold off. This economy needs 200,000+ jobs added monthly in order to make a meaningful dent in the unemployment rate and to have a real effect on the economy.

Next week marks the beginning of the second quarter earnings reporting season. Aluminum producer Alcoa (NYSE: AA) kicks things off with reporting their results on Monday. Two other standouts that report their earnings next week are JPMorgan Chase (NYSE: JPM) and Wells Fargo & Company (NYSE: WFC) which issue their results on Friday. I will be particularly interested in what JPMorgan has to say for their second quarter. This is the period in which their trading division experienced a multi-billion dollar trading loss.

As we enter into second quarter earnings reporting season, market expectations are so low for the quarter that I am looking for some upside surprises to occur within certain sectors. I am not sure if we are going to see much top line growth, however, over the past several quarters, companies especially in the tech sector have demonstrated exceptional productivity prowess which have certainly accentuated their bottom lines. That said, I will be extremely careful with how I navigate and trade these markets with a preference towards waiting until earnings reporting season concludes before making any considerable commitments. Good luck to all.

Have a great weekend 🙂

~George

One hot June!

Posted on by George Mahfouz

And I am not just referring to the hot summer temperatures across the country. Stocks were on fire on Friday capping off the best June for the key indices in over a decade. For the month, the Dow Jones Industrial Average (chart) finished up almost 4%, the Nasdaq (chart) +3.81%, the S&P 500 (chart) +3.96% and the leading small cap index Russell 2000 (chart) gained almost 5% on the month.

Equities got a huge boost on Friday after the European Union agreed that the rescue funds that have been established could be used for their bond markets without compliance to established budgets rules which would increase austerity measures. This caught investors off guard for no one expected such a drastic measure from the EU considering how historically slow their governments have acted during this crises. There now is a level of confidence globally that the EU is finally getting how serious the situation is, and seemingly are prepared to take meaningful action.

Back here at home, the second quarter is over and the markets’ attention will be shifting to corporate earnings reporting season this month. The good news here for stocks is that expectations are very low for Q2 earnings, so if companies are able to demonstrate any signs of growth, this alone could lift markets to new 52 week highs?

Next week is a shortened trading week due to Independence Day. Equity markets close early on Tuesday, and on the fourth of July, both bond and equity markets are closed for the day.

Have a great week and Happy 4th of July 🙂

~George