Month: November 2012

Snap back rally!

Posted on by George Mahfouz

Bulls took charge this holiday shortened trading week sending the four key indices up over 3%, albeit on light volume. The Dow Jones Industrial Average (chart) closed the week at 13009.68, the Nasdaq (chart) 2966.85, the S&P 500 (chart) 1409.15, and the small-cap Russell 2000 (chart) finished the week above 800. This after weeks of incessant selling pressure which created extreme oversold conditions. What also boosted equities this past week was the kickoff to the 2012 holiday shopping season and early reports of long lines and busy shopping malls.

The week ahead promises to be volatile as politics once again takes center stage. Congress and the President will meet to negotiate and hopefully move towards a resolution of the fiscal cliff dilemma facing our country. Although the fiscal cliff scenario continues to grab headlines, I am also keeping a close eye on the geopolitical backdrop out of the middle east and Europe. To me all of the above is enough risk to not get too comfortable with last weeks rally and to have protective stops in any and all positions. Good luck to all.

Have a great weekend 🙂

~George

5% haircut since election day…

Posted on by George Mahfouz

One can surmise that the markets have most certainly voted! Once again stocks sold off this week in light of the fiscal cliff fears and whether or not Washington will be able to get a deal done. For the week, the Dow Jones Industrial Average (chart) fell 1.77%, the Nasdaq (chart) -1.78%, the S&P 500 (chart) -1.45% and the small-cap Russell 2000 (chart) closed lower by 2.36%. There was a bit of reprieve from the selling pressure yesterday after both sides of the aisle came out of their first formal fiscal cliff meeting and indicated progress was being made. This was enough to help the aforementioned indexes to close in the green on Friday.

The market climate that we are now in reminds me of last summer when Congress was battling it out over the debt ceiling crisis and how the key indices were down close to 10% in a short period of time. Back then market volatility was historic while the politicians were duking out that crisis. Although stocks are certainly in correction mode, what I am not seeing this time is enormous volatility. Let’s take a look at the VIX index (chart). The VIX, also known as the fear gauge, is used as an indicator of investor sentiment. Right now the value of the VIX (chart) is not indicative of extreme panic in the marketplace especially when you compare it to last summer. Hopefully Washington can come up with a solution to resolve the fast approaching cliff which would restore confidence and calm the markets. Good luck to all.

Have a great weekend 🙂

~George

Post election drubbing!

Posted on by George Mahfouz

Stocks were slammed this week after the results of the 2012 presidential and congressional elections. In fact, it was the worst performing week for equities in months. The Dow Jones Industrial Average (chart) lost 2.1%. The Nasdaq (chart) -2.6%, the S&P 500 (chart) -2.4% and the small-cap Russell 2000 (chart) finished the week lower by 2.4%. With the election producing essentially no change in Washington, fears of the fiscal cliff playing out and much higher taxes took center stage and sent the markets spiriling. Furthermore, all of these bellwether indexes are now trading below their respective 200-day moving averages. For most market technicians and certain institutional investors, the 200-day moving average is a key technical metric that is relied upon as to the future direction of stocks or indexes. Personally, I would need to see several days of trading and closing below the line in order for me to completely change my view of where stocks may be headed.

Now that the election is behind us, we can all now begin to focus on not only what Washington will or will not do, but what really is happening behind the scenes of the economy and corporate America. Q3 earnings reporting season is winding down and as expected corporate profits have been affected by the slowing global economy. Between now and year end, I will be paying much closer attention to the economic numbers here and abroad, and even closer attention to the underlying technicals of the markets, which are beginning to show some cracks. As previously stated, in my view a couple of days of the indexes trading below the 200-day does not concern me too much, however, if we see a repeat performance next week with stocks continuing to decline, we very well may be in for a meaningful reversal that the bears have been waiting on. Good luck to all.

Have a great weekend 🙂

~George

Volatile start to November…

Posted on by George Mahfouz

The markets kicked off the month of November on Thursday with a 1% gain only to give it back the very next day. The Dow Jones Industrial Average (chart) finished the shortened trading week essentially flat -0.11%, the Nasdaq (chart) -0.19%, the S&P 500 (chart) -0.16% and the small-cap Russell 2000 (chart) -0.14%. Without question the jittery start to November can be attributed to the upcoming election on Tuesday and the mixed signals from corporate America as companies continue to report their Q3 results.

Despite the increase in volatility, economic reports out this past week from consumer confidence to manufacturing showed signs of improvement. Even the labor market showed an increase in the number of new hires in the month of October. That said, it’s certainly easy for these metrics to be overlooked considering what’s in store next week. Once the Presidential and Congressional elections are over, I think all market participants can once again focus on the fundamentals of the economy, corporate America and the direction the country will go into with the newly elected officials in place.

Let’s not forget about Q3 earnings reporting season which will continue next week with reports coming out of the likes of Humana (NYSE: HUM), News Corp. (NasdaqGS: NWSA), Qualcomm (NasdaqGS: QCOM) and Walt Disney Co (NYSE: DIS) just to name a few. Good luck to all.

Have a great weekend 🙂

~George