Month: September 2012

Just like August, September produces unlikely gains…

Posted on by George Mahfouz

Although stocks were mostly lower on the week, the month of September produced rare gains for the benchmark indexes. For the month of September, the Dow Jones Industrial Average (chart) gained 2.65%, the Nasdaq (chart) +1.61%, the S&P 500 (chart) +2.42% and the small-cap Russell 2000 (chart) closed the month up 2.12%. This capped a very impressive third quarter for equities with all of these key indices advancing sharply higher.

So now the encore! What promises to be an event driven final stretch of the year, investors can look forward to Q3 earnings reporting season in October and of course the Presidential and congressional elections in November. Not to mention the ongoing saga in Europe, the seemingly everlasting middle east crisis, and whether or not our country will face the “fiscal cliff” outcome which could spin our economy into a recession?

So as you can see stocks and bonds are certainly exposed to an enormous amount of uncertainty in the final quarter of the year. Typically when markets are in such a quandary, much higher volatility usually ensues. In any market environment and  especially the one we are heading into, it is always best to use protective stops and or protection in the form of puts if you have a long portfolio. Furthermore, it is always a good idea to consult with a professional investment advisor before implementing any type of strategy. Good luck to all.

Have a great weekend 🙂

~George

A bull breather…

Posted on by George Mahfouz

After such a torrid bull run this summer and with most major averages posting double digit gains, stocks finished lower this week, albeit modestly. For the week the Dow Jones Industrial Average (chart) closed down 0.10%, the Nasdaq (chart) -0.13%, the S&P 500 (chart) -0.13% and the Russell 2000 (chart) finished the week off 1.06%. This minor pullback is nothing compared to the rare and impressive September monthly gains with all of the above key indices advancing well over 3% so far this month.

As equities continue to remain strong after the Fed announced their latest stimulus package last week, I continue to monitor the underlying technicals of the markets and from what I see, the coast continues to remain clear. The one exception to how the big four is looking technically is that these key averages are at or near the 70 value level on the Relative Strength Index (RSI).  The RSI is a technical analysis indicator which measures gain and losses over a given period of time to identify whether or not stocks or indexes are currently oversold or in this case overbought.

That said, with central banks from around the world ready to flood the markets and economies with liquitidy if needed, I am now of the belief that stocks and certain commodities should remain overbought for the foreseeable future with the occasional pullbacks along the way. Good luck to all.

Have a great weekend 🙂

~George  

Stocks soar, the Fed pulls out all the stops!

Posted on by George Mahfouz

I know we keep talking about the Federal Reserve, but on Thursday Ben Bernanke announced the mother of all stimulus programs. The new stimulus package includes $4o billion a month to be injected into the economy  and a promise that it won’t stop until the unemployment picture dramatically turns around. Never before has a central bank made such a large extended commitment and then tie it to the jobs market.

On the heels of this announcement, stocks soared with the Dow Jones Industrial Average (chart) finishing the week up 2.15% and is now up year to date 11.26%. The Nasdaq (chart) closed the week up 1.52% and year to date is up a staggering 22.22%. The S&P 500 (chart) on the week marched 1.94% higher and so far this year is up 16.55%,  and last but not least, the Russell 2000 (chart) small-cap index closed up 2.66% and is tracking a year to date gain of 16.71%

Yes I triple confirmed the above statistics and there are no typos. Now the multi-million dollar question is  “is this bull market out of breath?” It’s only natural to think that this tape is overdone and is well overdue due for a healthy 5% or even 10% pullback? This may especially ring true with the most recent middle east tensions, the upcoming third quarter earnings reporting season and of course the U.S. presidential elections all on the horizon. That said, with the Federal Reserves unprecedented commitment to truly do whatever it takes to get this economy and now the unemployment picture completely turned around, I would think that any pullbacks would provide excellent entry points. Whatever you choose to do, make sure to always consult with a professional investment advisor.

Have a great weekend 🙂

~George

Nasdaq at 12 year highs, up over 20% year to date…

Posted on by George Mahfouz

Now who said we are in the dog days of summer? Stocks once again took off this week after the European Central Bank promised to buy the debt of struggling countries in the eurozone. For the week, the Dow Jones Industrial Average (chart) closed up 1.65%, the S&P 500 (chart) +2.23%, the Russell 2000 (chart) +3.72% and the tech heavy Nasdaq (chart) closed the week at fresh 12 year highs finishing up 2.26%. What a run this has been so far this year with staggering double digit gains for most of the major averages. Congratulations to all of the bulls out there!

The million dollar question now is; “is it time for some profit taking?” The short answer, yes! Always make sure to consult with your professional financial advisor when considering taking action, but I would think he or she would agree that it would be a good idea to take some off the table. The bulls case is that as long as the governments from around the world continue to expand their balance sheets, the markets should continue to go higher. All you have to do is look at the performance of the key indices so far this year and it’s easy to see the power of the central banks. The bears case is stocks are trading at multiples not seen in years and that earnings estimates are way too high and need to come down. No matter what the case is, and in my humble opinion, taking some profits after such an unprecedented run would be the responsible thing to do. Good luck to all.

Have a great weekend 🙂

~George

Rare August gains for key indices…

Posted on by George Mahfouz

The four most followed indexes produced unlikely gains for the month of August. Typically the dog days of summer is seasonally weak for equities, but not this year. For the month of August, the Dow Jones Industrial Average (chart) closed up 0.63%, the Nasdaq (chart) +4.34%, the S&P 500 (chart) +1.98% and the small-cap Russell 2000 (chart) finished the month up 3.2%.

Stocks once again benefited by the Fed promising to take further steps to help boost the economy if needed. Speaking in Jackson Hole, Wyoming, Ben Bernanke reiterated his concern over the state of the economy and that the central bank is prepared to act if warranted. So how will this mantra play out for the month of September?

September is typically one of the weakest months of the year for equities, however, could this month buck the trend just like August did? We should find out in short order with the release of the unemployment report next Friday. Talk about market and political implications! If the job market continues to deteriorate, you better believe this will become even more of a focal point as the election approaches. A further decay in the unemployment picture should also give the fed confirmation to further stimulate the economy. If this scenario plays out, one could surmise that the markets would continue to lift and that Mitt and Ann Romney may be soon moving to Pennsylvania Avenue.

I hope everyone has a safe and enjoyable Labor Day weekend 🙂

~George