Apple

Cheers To The Markets!

Posted on by George Mahfouz

Cheers to the markets and what a year for stocks! 2023 turned out to be a spectacular year for the stock market as not many expected the markets to rip-roar as it did last year. The Dow Jones Industrial Average (see chart here) finished the year up almost 14 percent. The S&P 500 (see chart here) closed the year up 24%. The Nasdaq Composite (see chart here) closed the year up a whopping 44 percent. A big part of the Nasdaq’s eye-popping performance was how the “Magnificent 7” performed. For those of you who do not know who the Magnificent 7 are, it is the big tech group made up of Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT), Google owner Alphabet (NasdaqGS: GOOGL), Amazon (NasdaqGS: AMZN), Nvidia (NasdaqGS: NVDA) and Meta Platforms (NasdaqGS: META) and Tesla (NasdaqGS: TSLA). Finally, the small-cap Russell 2000 (see chart here) closed the year up 15%.

Many stock market experts did not expect such a stellar year for stocks. Let’s dig in and see what happened. For starters, inflation itself retreated faster than anyone expected which now has the Federal Reserve speaking to cutting rates in 2024. This metric alone is very bullish for stocks. Then factor in how strong the economy has been it’s no wonder we are at or near all-time highs. What’s equally impressive is how the markets have shrugged off the geopolitical backdrop. From two wars that seemingly have no end is sight, to the U.S. political divide, to China’s stagnant economy, nothing seems to be bothering the markets, at least not yet.

As we now look forward to 2024, I think we are in for a doozy of a year, at least from a volatility standpoint. We are also in an election year, and this alone should create higher volatility. I would also expect that after such a strong performance in 2023 that a pause and/or even a correction of some sort could potentially be in the cards for the markets in general.

Wishing everyone the healthiest, happiest, and most prosperous new year 🙂

~George

No June Swoon This Year…

Posted on by George Mahfouz

No June swoon this year, these markets are simply not having it. June historically can be either a slow month or a month of selling pressure. Neither really happened this year. Despite a brief dip in the major averages a couple of weeks back due to inflation concerns, stocks and indexes held their own last month. The Dow Jones Industrial Average (see chart here) closed out the month at 34502, the S&P 500 (see chart here) finished the month just shy of 4400, the Nasdaq Composite (see chart here) closed out the month in record territory at 14503 and the small-cap Russell 2000 (see chart below) finished the month and first half of the year at 2310.

I remain in awe of the resiliency of stocks and most every other asset class out there. I read the other day that Facebook (NasdaqGS: FB) has become the fifth company in the United States to surpass the $1 trillion value mark. We now have in our country five companies that are valued at over $1 trillion dollars. Apple (NasdaqGS: AAPL), Amazon (NasdaqGS: AMZN), Microsoft (NasdaqGS: MSFT) and Alphabet aka Google (NasdaqGS: GOOGL) round out the top five trillion-dollar companies. When I see this type of action it makes me wonder how much earnings power do these companies need to continue to exhibit in order to keep their eye-popping valuations going? One other obvious similarity is the companies are all tech stocks and that is where the real growth has been. If you go back 20 years, I don’t think anyone would of expected five companies in our markets all reaching and boasting trillion dollar plus valuations. Heck, Microsoft’s market cap just surpassed $2 trillion dollars to join Apple as the only companies with more than a $2 trillion dollar valuation. Folks I am not a forensic analyst, but my goodness how is the law of large numbers playing a role here?

As I look at the technical shape of the major averages nothing really stands out to me with the exception of the Nasdaq Composite (see chart here). The Nasdaq has just entered overbought territory according to the relative strength index aka the RSI. The Nasdaq also just hit an all-time high so I think some sort of pullback could potentially be in the offing.

Have a safe and happy 4th of July weekend 🙂

~George

No June Swoon This Year - Paula Mahfouz

 

Big Tech Blowout!

Posted on by George Mahfouz

Big tech absolutely blew out their earnings in their most recent quarter. Let’s start with Apple; Apple (NasdaqGS:AAPL) experienced growth in each of its product categories. What’s truly unbelievable is Apple generated about a $billion dollars a day in revenue. Yes, no typo folks, a billion a day in revs in their most recent quarter. Facebook (NasdaqGS: FB) also crushed their quarter generating over $26 billion in revenues easily beating analysts expectations of $23 billion and Facebook’s earnings per share exceeded analysts’ expectations by 40%. Alphabet’s (NasdaqGS: GOOGL) quarter was also quite stellar posting revenues of $55 billion which is up over 30% from the same period a year ago and last but not least Microsoft (NasdaqGS: MSFT) posted revenue of over $41 Billion up almost 20% over for the same period last year. To me this is breathtaking on how these mega-cap companies continue to grow at such a high clip completely ignoring the “law of large numbers” .

So off to the races for the aforementioned stocks right? Not so fast. Despite popping after releasing their earnings, these stocks have started to trade lower. This could be a sign that these earnings reports were already baked into the price already. Of course, it is not uncommon for stocks to become a bit exhausted especially after the tear that the markets have been on so far this year. Let’s see how next week fares in whether or not the lack of follow through to the upside now that earnings are out.

As I look at the overall technical shape of the markets the Nasdaq Composite (see chart here), the Dow Jones Industrial Average (see chart here), the S&P 500 (see chart here) and the small-cap Russell 2000 (see chart here) are not currently overbought according to the relative strength index. What’s more is these indexes also remain comfortably above their respective 100 and 200 day moving averages and are finding current support at their 20-day MA.

Good luck to all 🙂

~George

 

Are The Indexes Out Of Balance?

Posted on by George Mahfouz

With how hot tech stocks have been lately, one has to ask are the key indexes out of balance? Let’s take a look. It is no secret tech stocks have been on fire, the Nasdaq Composite (see chart here) has been setting records weekly. Stocks like Tesla, Apple and Amazon continue to set all time highs. Price to earnings ratios aka the P/E ratio are also expanding to levels not seen since the tech bubble of the early 2000’s. I am not suggesting that tech as a whole is in a bubble, but there can be an argument that certain tech stocks are. I am not singling out Tesla at all, but what I am highlighting is the company’s eye-popping 1000 + P/E ratio. The price to earnings ratio is a metric for valuing a company that measures its current share price to its earnings per share. For example the S&P 500 typically trades in the 15-20 P/E range. Yes, a 15 to 20 P/E multiple is the historic price to earnings multiple that the S&P 500 trades at. So when you look at Tesla and see that this company’s P/E ratio is currently over 1000, it does bring pause and perspective into the mix.

Back to the indexes that appear to be out of balance. As the S&P 500 (see chart here) and the Nasdaq Composite (see chart below) continue to set records, the majority of stocks have not returned to their pre COVID highs and still remain down on the year. This to me is something to pay attention to. Sure, some tech stocks deserve their current valuations due to how they are growing and benefiting from the widespread lockdowns. Tech stocks and the technologies they provide are serving businesses and consumers alike in a way no one would of thought of before the pandemic took hold of our country. However, even stocks like Apple have high seen quite the expansion of its P/E multiple which is currently trading at 39. Bottom line for me, as we are setting records each week, I would prefer to see a broader base rally to ensure that we are not out of balance with each and every record that is being set.

Good luck to all 🙂

~George

Are The Indexes Out Of Balance? - Paula Mahfouz

 

 

Big Tech Blowout!

Posted on by George Mahfouz

Big tech steals the show with blowout earnings results. Apple (NasdaqGS: AAPL), Amazon (NasdaqGS: AMZN) and Facebook (NasdaqGS: FB) all took the street by surprise with their upside earnings reports. For Apple, in addition to their blowout earnings, the company announced a 4-1stock split. This was more than enough for Apple to close up over 10% yesterday at an all time high of $425.04. Apple’s earnings came in over $2.00 per share on revenues just shy of $60 billion. Stunning numbers considering the backdrop that our country is currently in. When I look at what Amazon did, I am equally if not more impressed especially with how they grew their revenues. It’s hard to believe a company of this size grew their revenues 40% to almost $90 billion on the quarter. Without question Amazon has benefited more than any other company due to the pandemic. Consumers have flocked to online shopping more now than ever. Last but not least, let’s look at what Facebook did. Despite experiencing ad boycotts by some of the biggest brands in the world, Facebook managed to grow ad revenues by over 10% and grew earnings by almost 100%. I don’t think anyone expected these type of quarterly results from this group with all things considered.

Let’s take a gander at the major averages and how they are looking from a technical standpoint. The Dow Jones Industrial Average (see chart here) closed the week at 26428.32. When I look at the chart of the Dow, this index is not overbought according to the (RSI) and the Dow closed right around its 20-day and 200-day moving averages. The S&P 500 (see chart here) closed at 3271.12 and this index bounced off of its 20-day moving average with perfection. The Nasdaq Composite (see chart here) has been the big winner so far this year and technically speaking this index could potentially keep running. Heck, i’d be ok if it paused and consolidated a bit because of the run its been on. The other index that I keep an eye on is the small-cap Russell 2000 (see chart below). Speaking of consolidation, that is what appears to be happening with the Russell 2000. This index has been trading sideways for the past week or so and is trading consistently above its 20 and 200-day moving averages during this consolidation period. So all in all the aforementioned indexes appear to be on solid ground from a technical analysis standpoint.

In closing, despite the current shape of the market, the month of August historically tends to be a volatile month. Couple this with the upcoming Presidential election and we could be in for a wild ride between now and election day.

Good luck to all 🙂

~George

Big Tech Blowout - Paula Mahfouz

Did Apple Just Save Tech?

Posted on by George Mahfouz

Tech stocks have been battered lately but as in the past Apple just might of saved tech stocks, at least for the time being. After the close, Apple reported an astonishing $53 billion in revenues growing at a 17% clip. What’s more is Apple’s profits rose more than 30% coming in at a whopping $11.5 billion in profits. I thought there is a thing called the law of large numbers? Apparently not at Apple! People don’t realize how hard it is to grow a company of this size in the way Apple continues to grow. Year after year, quarter after quarter, simply amazing. The question now becomes is yesterday’s earnings beat by Apple enough to put a floor in tech stocks. Technology stocks have been taken out to the woodshed as of late with seemingly no end in sight, until yesterday. What I will be looking for today and for the rest of the week is whether or not companies continue get sold off after their earnings release which has been the trend this particular earnings reporting season.

In my last blog I eluded to the possibility of a breakout of the S&P 500 (chart) or a triple top fade in the index.  Quite honestly neither really happened, at least not yet. The S&P 500 (see chart below) essentially has been trading in a range between 2800 and 2850. Earnings reporting season has yet to be the catalyst for such a breakout or breakdown for that matter. Triple tops are very powerful to the technical set-up on any given index or stock for that matter. Apple’s earnings could very well be the catalyst for the markets to once again challenge the current triple top formation. Now that we are in August I do think we will get that answer soon enough. I do expect volatility to pick up a bit here in August which is not uncommon for this time of year. The SPY’s (chart) which tracks the S&P 500 (chart) has demonstrated support at its 20-day moving average which is essentially $279.50 and the overhead resistance is essentially the $285.00 zone. Let’s see if the S&P can break away from either line. Good luck to all 🙂

~George

S&P 500 - George Mahfouz Jr.

A Sell The News Environment?

Posted on by George Mahfouz

We are almost at the midway point of earnings reporting season and it appears that we are in a “sell the news” type environment. Amazon (Symbol: AMZN), Intel (Symbol: INTC), Bank of America (Symbol: BAC) JP Morgan Chase (Symbol: JPM) are amongst other high profile companies that have smashed it out of the park with their latest quarterly earnings reports and yet the market does not seem to care. At best stocks have gone sideways with breakout moments only, only to find themselves priced back where they started before their earnings reports. One could say that stocks have already priced in their respective growth and the markets seem to agree. To close out the month of April, the Dow Jones Industrial Average (chart) closed at 24,163, the S&P 500 (chart) finished the month at 2648, the Nasdaq Composite (chart) closed at 7066 and the small-cap Russell 2000 (chart) settled at 1542.

As mentioned above, we are around the mid-point of the season and there are still hundreds of companies that are set to report their earnings this week which includes the likes of: Apple (NasdaqGS: AAPL), Devon Energy Corp. (NYSE: DVN), Gilead Sciences Corp. (NasdaqGS: GILD), Snap Inc (NYSE: SNAP), Avis Budget Group (NYSE: CAR), Caesars Entertainment Corp (NYSEL CZR), CVS Health Corp. (NYSE: CVS), Estee Lauder Companies Inc. (NYSE: EL), Holly Frontier Corp. (NYSE: HFC), Mastercard Inc. (NYSE: MA), MetLife Inc. (NYSE: MET), Yum! Brands Inc. (NYSE: YUM), Avon Product Inc. (NYSE: AVP), CBS Corp. (NYSE: CBS), Ferrari NV (NYSE: RACE), Kellogg Co. (NYSE: K), Shake Shack Inc. (NYSE: SHAK), Sprouts Farmers Market Inc. (NasdaqGS: SFM), Weight Watchers International Inc. (NYSE: WTW), Celgene Corp. (NasdaqGS: CELG) and Cheniere Energy Corp (NYSE: LNG). These are just a few of the names that report this week and as you can see there is a wide variety of companies that could potentially move the market from its most recent sideways action. Good luck to all 🙂

~George

 

Dow 22,000 In Sight…

Posted on by George Mahfouz

The Dow Jones Industrial Average (chart) closed the month of July at a record high and came within 70 points of the 22,000 mark. Just a few short months ago that the Dow surpassed the 21,000 milestone. What an incredible run in such a short period of time! Not only is the Dow Jones Industrial Average (chart) notching new record highs almost daily, the Nasdaq (chart) last Thursday posted a new record at 6460, as did the S&P 500 (chart) setting a new record of 2484. Last but not least, the small-cap Russell 2000 (chart) also set a new record last week of 1452. However, both the Nasdaq (chart) and the small-cap Russell 2000 (chart) have reversed their upward trajectory over the last few trading sessions in a noticeable manner. Let’s keep an eye on this development.

I think it is safe to say that Q2 earnings reporting season has helped fuel the Dow Jones to new record highs as well as the S&P 500. Tech stocks have been reporting a mixed bag so far this earnings reporting season which is why that index has started to abate a bit. All eyes today are on Apple (NasdaqGS: AAPL) which report their earnings results after the close. This could be the one stock that either reverses the latest mini-downward trend in the Nasdaq or for that matter, accelerate it. As I look to the technical shape of the the aforementioned indexes, only the Dow Jones Industrial Average (chart) is on overbought territory, while the S&P 500 (chart), Nasdaq (chart) and the small-cap Russell 2000 (chart) have begun their reversion to the mean and are all approaching the 50 value level of the relative strength index.

Game plan for August? Personally, I think it is time to reduce long exposure to equities due in part to this startling run stocks have had all year long. This coupled with the month of August being an historically weak month for equities could create the perfect set up for the much anticipated market correction that the bears have been waiting on. That said, I have to remind myself that there has been no such thing as typical in these markets for we have been in unchartered territory for a long period of time. One final note, it is always recommended to consult with a certified financial planner before making any adjustments to your portfolio.

Good luck to all 🙂

~George

 

Tech Stocks Hit The Brakes!

Posted on by George Mahfouz

After going up in a straight line for months, the technology sector (see chart below) has reversed its upward course. After hitting an all-time high of 6341.70 on June 9th, the Nasdaq (chart) has given back 190 points or three percent while approaching its 50-day moving average. Nowadays it’s pretty rare to see a one percent pullback in tech stocks let alone a three percent retracement in a week. The media is now all over how tech stocks today are beginning to resemble the internet bubble. The difference between today and yesteryear is that the top five tech stocks – Amazon (NasdaqGC: AMZN), Apple (NasdaqGC: AAPL), Facebook (NasdaqGS: FB) Google’s parent company Alphabet (NasdaqGC: GOOGL) and Microsoft (NasdaqGC: MSFT) have been responsible for a big chunk of the Nasdaq and S&P 500 (chart) recent gains. The problem with comparing today’s market with the internet bubble is that the aforementioned tech leaders all have incredible balance sheets while continuing to grow at a pace that supports their relative stock prices. One may argue that Amazon remains overpriced especially with its lofty P/E ratio.

It’s hard to imagine that anyone would be concerned about a three percent pullback in any stock or index, but because of how strong stocks have been since the election, anything other than a flat to up day will get noticed. That said, without question all eyes will be on whether or not the Nasdaq’s 50-day moving average will get tested. The last time the Nasdaq (chart) did not hold its 50-day support line was last October. Since then tech stocks have tested and moved off of its 50-day average multiple times. 6085 is the current the 50-day moving average of the Nasdaq which is about 65 points away. I am not suggesting it will go there, but if it does and according to the way tech stocks have reacted to that particular support line, a bounce could be in the cards. Good luck to all 🙂

~George

Nasdaq chart - George Mahfouz Jr

No Fear Here…

Posted on by George Mahfouz

Despite North Korea launching its seventh missile test of the year on Sunday and the White House seemingly in an upheaval, stocks continue to demonstrate no fear and continue their record setting ways. Today the S&P 500 (chart) and the Nasdaq (chart) hit all time highs. Without question this bull market is now even catching wall street veterans off guard. Q1 earnings reporting season is close to wrapping up and other than retail, most companies have reported in-line or outright beats in their earnings results, especially the tech sector. Tech has been on fire lately and this is due in large part of mega-cap tech smashing analysts expectations. Earnings results from companies such as Apple (NasdaqGS: AAPL), Amazon (NasdaqGS: AMZN), Alphabet (NasdaqGS: GOOGL) and Facebook (NasdaqGS: FB) has propelled the Nasdaq (chart) and these particular issues to all-time highs. The Dow Jones Industrial Average (chart) and the Russell 2000 (chart) remain in striking distance of setting new records as well. It is truly remarkable how the markets have been able to weather the current political environment here in the U.S. and the geopolitical risks abroad.

From a technical perspective, the aforementioned key indices are in pretty good shape. The Nasdaq (chart) is the only one of the four that remains in overbought territory according to the relative strength index. All of these averages also remain above their respective 50-day and 200-day moving averages, yet another bullish sign. Volatility also remains at historic lows. So one may ask what about the “sell in May and go away” adage? From a technical standpoint, I do not see any reason why these markets won’t continue to melt up from here. Of course there is always the risk of a geopolitical event or the actual seasonal risk of assets taking a pause or retracing a bit. That said and whatever the case may be, it is undeniable that the markets have been the most resilient in years, if ever.

Good luck to all 🙂

~George