Month: May 2015

Record Closing High For The S&P 500!

Posted on by George Mahfouz

Despite choppy trading for most of the week and weak economic data being released, the S&P 500 (chart) closed the week out at a record closing high of 2122.73. The Dow Jones Industrial Average (chart) is now only a mere 16 points away from its all-time high of 18,288.63, the Nasdaq (chart) appears to be closing in on its record high of 5119.83 and the small-cap Russell 2000 (chart) is attempting to claw its way back to record territory.

I thought you were supposed to “sell in May” and go away? Apparently not! However, I will say this, these records that are occurring are happening on lighter volume than I would want to see to validate the most recent price action. Nonetheless, you cannot deny the incessant strength that the markets are showing. Not less than two weeks ago it appeared that we might of been en route to the 10% correction or so that had been chattered up by the pundits. In early May, the S&P 500 (chart) had breached its 50-day moving average only to snap back and set a new record closing high yesterday.

Speaking of the moving averages, the aforementioned key indices are now comfortably trading above their 50-day moving averages with the exception of the small-cap Russell 2000 (chart). The Russell yesterday did closed right at its 50-day. We will see next week if this index can join the other major averages and reclaim its 50-day moving average and close in on its record high. Now let’s take a look at the Relative Strength Index which another favorite technical indicator of mine. The RSI is a technical indictor that demonstrates whether or not a index or stock is oversold or overbought, click here for the complete definition of the RSI. Even though we are at record highs, none of the major averages are in overbought territory according to the RSI. Add to the mix that next week will lead up to Memorial Day weekend and volumes should begin to decrease, I do not see any major catalyst that would interfere with the most recent upward trend of the market.

Speaking of Memorial Day, both Paula and I wish everyone an upcoming safe Memorial Day holiday weekend and let’s not ever forget all who had bravely served our country.

~George

Late April Sell-Off Wakes Up The Bears…

Posted on by George Mahfouz

Stocks sold off sharply on the last trading day of April. The Dow Jones Industrial Average (chart) fell 195 points, the Nasdaq (chart) closed down 82.22 points, the S&P 500 (chart) lost 21.34 points and the small-cap Russell 2000 (chart) finished lower by 26.83 points. The biotech sector has lead the charge in this most recent selloff with the most popular biotech ETF (Symbol: IBB) (chart) losing over 10 percent of its value since mid-March. Another factor in this sell-off is the sloppy earnings reporting season we find ourselves in. Just this week both Twitter (NYSE: TWTR) and Linkedin (NYSE: LNKD) surprised the street with their weak quarterly results and even weaker forward guidance. So the selling pressure is not just in the biotech space, it has now spilt over to the technology sector as a whole. That said, this morning there may be a bit of a respite with the futures market pointing up sharply.

Let’s take a look at the technical shape of the markets as we now enter into May. One troubling sign is the four major averages mentioned above have all breached their 50-day moving average line, with the small-cap Russell 2000 falling prominently below it. Let’s see if these key indices remain below this popular technical indicator for more than a few days. A one day breach does not necessarily mean a total technical breakdown however, another slight concern of mine is that these averages are not oversold yet according to the relative strength index or the RSI. Click here for the definition of the RSI. Now take a look at the charts of the Dow (chart), Nasdaq (chart), S&P 500 (chart) and the Russell 2000 (chart) and you will see at the very top of the chart the plot of the relative strength index and you will further see that these indexes have more room to go to reach the 30 value level of the RSI, which is the level that qualifies an oversold condition. Now throw into the mix that May is historically a weak month for equities and we indeed be in for some additional selling pressure.

In closing, I will re-visit the technical make-up of the markets in mid-May and see where there could be some buying opportunities. Good luck to all 🙂

~George