1000 Points In 7 Trading Days?

I am not even sure what to say here, almost 1000 points in 7 trading days? After closing above the 25,000 mark for the first time ever on January 4th, the Dow Jones Industrial Average (see chart below) is now closing in on the 26,000 mark in a matter of days. I simply do not understand how this bellwether index can notch 1000 point gains in such a short period of time. In fact most of the major averages are continuing to set records almost daily. How long can this go on? Without question we are on the brink of the strongest bull market in recorded history. The Dow Jones Industrial Average (chart) closed the week at a record 25,803.19, the S&P 500 (chart) closed at a record 2,786.24, the Nasdaq Composite (chart) closed at a record high of 7,261 and the small-cap Russell 2000 (chart) closed the record setting week at 1,591.90. The market was boosted on Friday in part by the strong quarterly earnings results of JP Morgan Chase.

Speaking of earnings reporting season, this week truly is the start of earnings reporting season in which most analysts expect strong top and bottom line growth from corporate America. Over the past few years the markets did witness strong bottom line growth in which a lot of that growth was due to improved efficiencies and reductions of the workforce. Now the opposite is occurring. The economy is expanding as is the job market. This should bode well for not only company earnings but for the continuation of the bull market. That said, I would think that a pullback of any kind is in the cards and I would also expect that investors and traders would be there in support of a retracement.

From a technical point of view equites are clearly overbought according to the relative strength index also referred to as the RSIHowever, this favorite technical indicator has not provided the guidance and reliability as it usually does simply because these markets have remained overbought for one of the longest stretches I can remember. There will be a time where the RSI will become more reliable as it once was, but in my humble opinion you will need a “normal” market environment for this to be the case. Good luck to all 🙂

~George

dow jones - george mahfouz jr

New Year, New Records?

Happy New Year! Will 2018 be a new year of new records? Nothing would surprise me. Especially as the Dow Jones Industrial Average (chart), the S&P 500 (chart), the Nasdaq (chart) and the small-cap Russell 2000 (chart) shattered record after record after record in 2017. In fact the Dow Jones Industrial Average set 70 record closing highs in 2017. That’s not a typo folks, 70 record closing highs. The other aforementioned key indices also set multiple record highs throughout last year. So could we see a repeat performance in 2018? I don’t know about another 70 record highs this year but I would not be surprised to see continuing strength in the markets in 2018. Yes the Federal Reserve is now in a rate hike mode which typically does not bode well for stocks, but this Fed and central banks from around the world understand the need to go about their new rate hike policies in a gradual manner. Raising rates too aggressively could be the exact catalyst to put the brakes on this almost decade long bull market. I don’t think this will be the case at least with our own Federal Reserve. Jerome Powell will be replacing Janet Yellen in early February as our new Federal Reserve Chairman. Mr. Powell who has been a member of the Federal Reserve’s board of governors since 2012 has voted for keeping interest rates at bay while the economy continues to recover.

Speaking of the economy, expansion continues to occur and we will soon find out how our economy is  trickling down into corporate America. Fourth quarter earnings reporting season will begin here in January and this could very well serve as a key catalyst for the continuation of the bull market. That said, I think most investors and traders are looking for the markets to pause and pullback from this historic run we continue to be on. It is truly breathtaking to witness the record pace that stocks have enjoyed for years now. Personally, I hope and some point in time we do get a meaningful pullback so we can have the opportunity to step in at lower prices. Good luck to all and Paula and I wish everyone the healthiest and happiest new year! 🙂

~George