Bulls

Staying True To Form…

Posted on by George Mahfouz

In late September stocks appeared to be heading to new 52 week and multi-year lows. But as this market has demonstrated its resilience during this six year bull run, the four major averages found support near its previous lows in late August and have bounced nearly 10%. This most recent market action have yet again muzzled the bear pundits and revived the bulls hopes for a possible year-end rally. For the week the Dow Jones Industrial Average (chart) closed modestly higher up 131.48 points, the Nasdaq (chart) had a weekly gain of 56.22 points, the S&P 500 (chart) finished up 18.22 points and the small-cap Russell 2000 (chart) bucked the uptrend falling slightly by 3.05 points.

So could there be a year-end rally in the cards? I think the answer to that question will come forward as we are now kicking into high gear with Q3 earnings reporting season. Already this past week we heard from the likes of JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS) and international conglomerate General Electric (NYSE: GE) who all provided results investors could cheer about. Each one of these companies notched impressive gains on the week not only helping the key indices, but also instilling confidence with investors. However, and as we all know, earnings reporting season can be volatile and we are at just at the starting gate.

Next week we will get quarterly results from technology giant Broadcom (NasdaqGS:BRCM), oil and gas equipment services behemoth Halliburton (NYSE: HAL), Bank of New York Mellon (NYSE: BK), Chipotle Mexican Grill (NYSE: CMG), Yahoo (NasdaqGS: YHOO), biotech giant Biogen (NasdaqGS: BIIB), Coca-Cola Co. (NYSE: KO), General Motors (NYSE: GM), Las Vegas Sands Corp. (NYSE: LVS), Amazon.com Inc. (NasdaqGS: AMZN), E*Trade Financial Corp. (NasdaqGS: ETFC), basic materials giant Freeport-McMoRan Inc. (NYSE: FCX), Microsoft (NasdaqGS: MSFT) and American Airlines Group Inc. (NasdaqGS: AAL) just to name a few.

These are only a handful of companies scheduled to report next week with hundreds more to follow in the coming weeks. That said, both Paula and I will continue to remain patient and wait until after earnings reporting season before we consider any new market strategies.

Good luck to all 🙂

~George

As Expected, New Market Highs Continue…

Posted on by George Mahfouz

In my previous blog, I eluded to the notion that the bulls would remain in charge for the foreseeable future and sure enough, in charge they are. Last week, the Dow Jones Industrial Average (chart), the S&P 500 (chart), and the small-cap Russell 2000 (chart) all hit record highs while the Nasdaq (chart) continues to gravitate toward the 5000 level. This market has no quit. With the majority of the S&P 500 companies reporting their Q1 earnings, overall earnings growth was relatively good, topping expectations. Meanwhile, Fed Chair Janet Yellen stated at her biannual meeting with the Senate Banking Committee that the Fed will be patient before any change in interest rate policies and that guidance would be given prior to any such action. This, along with the no real surprises coming out of earnings reporting season and the U.S. labor market showing a continuation of job growth, without question has played a role in the continuing strength of the U.S. stock market.  

Okay, all clear right? Well, we all know there is always the other side to the story and markets do not go up in a straight line forever. Without many upcoming catalysts in March, or in any given time period where catalysts are few, I always refer to the technical shape up of the markets to see if overbought or oversold conditions exist. As you all know by now, one of my favorite technical indicators to gauge whether or not the markets are in extreme conditions, is the Relative Strength Index. If you go back historically and look at the RSI indicator of any given stock or index, you too can see the reliability of this particular indicator when it reaches overbought or oversold conditions. Click on this link to get the definition of the RSI. Now I am not saying to completely base trading or investment decisions off of this technical indicator or any other technical indicator for that matter. However, for me personally this has proven to be a trusted guide and I do include this analysis when viewing the current market environment. That said, we are beginning to look a little overbought and I am going to look for pullbacks before I entertain any new positions in equities. Good luck to all and I wish all a very prosperous month 🙂

~George