Bank of America

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

 

Earnings Take Center Stage…

Posted on by George Mahfouz

Earnings reporting season begins in earnest this week which could play a role in determining whether or not the bull market has more room to run. This past Friday the money center banks kicked off the reporting season as JP Morgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) recorded eye popping profits while Wells Fargo (NYSE: WFC) continues to deal with the aftermath of the “fake-accounts” debacle that rocked the bank last year.

As I look at the charts of the key indexes, I do see a potential technical catalyst looming. The Dow Jones Industrial Average (chart), the S&P 500 (chart) and the small-cap Russell 2000 (chart) all share similar and current chart patterns. Over the past month or so, these key indices have been consolidating and trading in a tight range and when you have a looming catalyst such as earnings reporting season, most likely this pattern will breakout or breakdown. The Nasdaq (chart) does not fit this consolidation profile yet as it has been making new highs and leading the pack so far this year. Another technical set-up I look for is overbought or oversold conditions. Seemingly we have been in overbought conditions since the election but technically we are not according to the relative strength index also known as the RSI.

In my previous blog I did write about my expectation of increased volatility as we headed into January and earnings reporting season and how to hedge yourself against such volatility. To my surprise, vol has remained relatively low so far, however, there are catalysts looming as described above. As far as protecting a portfolio against any future volatility, there are many ways to do so but the most effective and simplest way is to buy S&P 500 puts. Especially while vol is low and premiums are relatively cheap. So if you have a “long only” portfolio buying some protection in the form of S&P 500 put options might not be a bad idea. Of course it is always best to consult a certified financial planner(s) before making any investment decisions or any adjustments to your current portfolio. My goal is to bring light to strategies that can be helpful to you that certain managers might not cover.

Good luck to all 🙂

~George

 

 

Strong Week For Stocks!

Posted on by George Mahfouz

The major averages continue to show strength upon the launch of first quarter earnings reporting season. The Dow Jones Industrial Average (chart) closed the week up 1.8%, the Nasdaq (chart) also closed up 1.8%, the S&P 500 (chart) added 1.6% and the small-cap Russell (chart) 2000 led the charge by closing the week up a whopping 3.1%. The money center banks such as JPMorgan Chase NYSE: JPM (chart), Bank of America NYSE: BAC (chart) and Citigroup NYSE: C (chart) which reported their earnings late in the week did help continue the momentum we have recently seen in the markets.

The question now is can earnings reporting season which begin in earnest next week breakout this market to new highs? Companies that are scheduled to report next week are International Business Machines Corp. NYSE: IBM (chart), Morgan Stanley NYSE: MS (chart), Netflix NasdaqGS: NFLX (chart), Goldman Sachs NYSE: GS (chart), Discover Financial Services NYSE: DFS (chart), Intel Corp. NasdaqGS: INTC (chart), Intuitive Surgical NasdaqGS: ISRG (chart), Johnson & Johnson NYSE: JNJ (chart), TD Ameritrade Holding Corp. NasdaqGS: AMTD (chart), Yahoo! Inc. NasdaqGS: YHOO (chart), American Express NYSE: AXP (chart), Coca-Cola NYSE: KO (chart), Qualcomm NasdaqGS: QCOM (chart), Biogen NasdaqGS: BIIB (chart), E*Trade Financial Corp. NasdaqGS: ETFC (chart), General Motors NYSE: GM (chart), Microsoft Corp. NasdaqGS: MSFT (chart), Southwest Airlines NYSE: LUV (chart), Starbucks NasdaqGS: SBUX (chart), Visa Inc. NYSE: V (chart), American Airlines Group NasdaqGS: AAL (chart), Caterpillar NYSE: CAT (chart) and General Electric NYSE: GE (chart) just to name a few.

Without question the aforementioned earnings reports will play a significant role in whether the key indices will breakout to new highs or struggle at their current resistance levels. One other historic factor that can play into the mix is April tends to be one of the top performing months of the year. Whatever the case is, I think it’s safe to assume a breakout or possibly a breakdown is on the horizon. Good luck to all 🙂

~George