Dow Jones

Back on track…

Posted on by George Mahfouz

Despite some market jitters and a pullback in June, stocks are right back in bull mode with the Dow and S&P closing at new highs. For the week, the Dow Jones Industrial Average (chart) closed up 2.17%, the S&P 500 (chart) +2.96%, the Nasdaq (chart) +3.47% and the small-cap Russell 2000 (chart) closed the week out up 3.10% also closing at an all time high. These impressive weekly gains were spurred on by Ben Bernanke’s reassurance that the fed’s easy monetary policies will continue for the foreseeable future.

Once again the mettle of the market will be tested this week with Q2 earnings reporting season kicking into high gear. Here are some of the companies that will report their second quarter results: Citigroup (NYSE: C), Coca-Cola (NYSE: KO), Goldman Sachs (NYSE: GS), Johnson & Johnson (NYSE: JNJ), The Charles Schwab Corporation (NYSE: SCHW), Yahoo (NasdaqGS: YHOO), Bank of America (NYSE: BAC), American Express (NYSE: AXP) and Ebay (NasdaqGS: EBAY), International Business Machines, (NYSE: IBM), Intel (NasdaqGS: INTC), United Health (NYSE: UNH), Google (NasdaqGS: GOOG) Blackrock (NYSE: BLK), Microsoft (NasdaqGS: MSFT) and Morgan Stanley (NYSE: MS).

So as you can see, next week’s earnings reports will take center stage and should guide our markets as we continue to go through the summer months. I look for volatility to increase which is typical with earnings reporting season. Good luck to all.

Have a great week 🙂

~George

Will the month of December be jolly for stocks?

Posted on by George Mahfouz

Although the key indices finished essentially flat for the month of November, everyone now is asking “will a Santa Claus rally come into effect?” For the month, the Dow Jones Industrial Average (chart) closed lower by 0.55%, the Nasdaq (chart) finished up 1.11%, the S&P 500 (chart) +0.29% and the small-cap Russell 2000 (chart) closed the month up 0.39%.

With the ever increasing rhetoric coming out of Washington regarding the fiscal cliff and whether or not a deal can be made, I am not so sure that we can have a year end rally. Markets hate uncertainty and unfortunately it may take a market swoon for both sides of the aisle and the President to come together on a deal. If this is the case, we could indeed retest the mid-November lows on the S&P 500 (chart) which would be about 70 S&P points from the close on Friday. That said, the markets right now are so sensitive to every word that comes out of Washington, a rally could also occur should there be any positive developments. Most traders embrace this type of environment for it does produce opportunities on the long and short side.

Technically speaking, all of the aforementioned indexes including the transports remain above their respective 200-day moving averages and appear to want to go higher, however, politics and policy do hold the cards as to how we close out the year. Good luck to all.

Have a great weekend 🙂

~George

Snap back rally!

Posted on by George Mahfouz

Bulls took charge this holiday shortened trading week sending the four key indices up over 3%, albeit on light volume. The Dow Jones Industrial Average (chart) closed the week at 13009.68, the Nasdaq (chart) 2966.85, the S&P 500 (chart) 1409.15, and the small-cap Russell 2000 (chart) finished the week above 800. This after weeks of incessant selling pressure which created extreme oversold conditions. What also boosted equities this past week was the kickoff to the 2012 holiday shopping season and early reports of long lines and busy shopping malls.

The week ahead promises to be volatile as politics once again takes center stage. Congress and the President will meet to negotiate and hopefully move towards a resolution of the fiscal cliff dilemma facing our country. Although the fiscal cliff scenario continues to grab headlines, I am also keeping a close eye on the geopolitical backdrop out of the middle east and Europe. To me all of the above is enough risk to not get too comfortable with last weeks rally and to have protective stops in any and all positions. Good luck to all.

Have a great weekend 🙂

~George

Rare August gains for key indices…

Posted on by George Mahfouz

The four most followed indexes produced unlikely gains for the month of August. Typically the dog days of summer is seasonally weak for equities, but not this year. For the month of August, the Dow Jones Industrial Average (chart) closed up 0.63%, the Nasdaq (chart) +4.34%, the S&P 500 (chart) +1.98% and the small-cap Russell 2000 (chart) finished the month up 3.2%.

Stocks once again benefited by the Fed promising to take further steps to help boost the economy if needed. Speaking in Jackson Hole, Wyoming, Ben Bernanke reiterated his concern over the state of the economy and that the central bank is prepared to act if warranted. So how will this mantra play out for the month of September?

September is typically one of the weakest months of the year for equities, however, could this month buck the trend just like August did? We should find out in short order with the release of the unemployment report next Friday. Talk about market and political implications! If the job market continues to deteriorate, you better believe this will become even more of a focal point as the election approaches. A further decay in the unemployment picture should also give the fed confirmation to further stimulate the economy. If this scenario plays out, one could surmise that the markets would continue to lift and that Mitt and Ann Romney may be soon moving to Pennsylvania Avenue.

I hope everyone has a safe and enjoyable Labor Day weekend 🙂

~George

Stocks lower on the week…

Posted on by George Mahfouz

Despite a rally on Friday, the benchmark indexes finished the week in the red. The Dow Jones Industrial Average (chart) fell 0.88%, the Nasdaq (chart) -0.22%, the S&P 500 (chart) -0.50% and the Russell 2000 (chart) -1.31%. The market action this week broke a six week stretch of gains.

What helped fuel the market on Friday was Ben Bernanke’s comment in a letter that the Fed has more room to add yet even more stimulus if the economy needs it. Is it me or are we all a little exhausted by the same regurgitation of the Fed coming to the rescue of the economy and the markets? What’s clear is investors are are seemingly and exclusively looking to invest in stocks and bonds based on what the central banks will or will not do. To me this platform has now become overkill and I am going to be very cautious on the long side of things going forward. That said, if you have been short the market based on economic and corporate fundamentals, theoretically you have been on the right side of the trade, however, chances are your short thesis has hurt your portfolio because of the accommodative banking policies from around the world.

In my humble opinion this cannot go on forever and I certainly do not want to be long the market when the policymakers say “that’s enough!” Good luck to all.

Have a great weekend 🙂

~George

Let’s talk technicals…

Posted on by George Mahfouz

As certain stocks and markets continue to unexpectedly plow to new 52 week highs, I think it’s time to look at the technical aspect of the indexes. For the week, the Dow Jones Industrial Average (chart) finished up 0.51%, the Nasdaq (chart) +1.84%, the S&P 500 (chart) +0.87% and the Russell 2000 (chart) +2.29%. I do not remember a time when equities have behaved this well in the month of August, albeit on very low volume.

Now to the technicals. I typically refer to two of the more popular technical indicators that certain market technicians, program trading models and even institutional investors utilize, and they are, the Relative Strength Index (RSI) and the Moving Averages technical indicators. The RSI is designed to demonstrate whether or not an index or equity is overbought or oversold, depending on certain value levels. According to the RSI principle, the 70 value level or greater, is an overbought condition and the 30 value and below is an oversold condition. Pertaining to the moving averages, the 50-day and the more closely monitored 200-day moving average, are the key markers that market technicians and program trading models look for and potentially act on.

In looking at the four major averages, they are all currently trading considerably above their respective 50-day and 200-day moving averages. However, both the Nasdaq (chart) and the S&P 500 (chart) is on the cusp of breaking through the 70 value level on the RSI. Furthermore, the Dow Jones Industrial Average (chart) and the Russell 2000 (chart) are not too far behind trading around the 65 value level. This is an indication that the markets are potentially becoming overbought and are due for some type of pullback. Please keep in mind that stocks can remain overbought or oversold for extended periods of time. That said, when the RSI on a given equity or index begins to trade at or above this key level, a reversal of some sort typically occurs. Now there are many other factors and technical indicators to refer to when analyzing market conditions, but my preference is to keep it simple when looking at the technicals, and the RSI and moving averages indicators do it for me. Good luck to all.

Have a great weekend 🙂

~George

 

What a day for the bulls!

Posted on by George Mahfouz

Stocks took off right out of the gate this morning thanks in part to a better than expected payroll number. Private sector hiring had its best showing in five months creating 163,000 new jobs compared to the 100,000 number most economists anticipated. This was enough to send the Dow Jones Industrial Average (chart) up 217.29 points, the Nasdaq (chart) +58.13, the S&P 500 (chart) +25.99 and the Russell 2000 (chart) +19.88. After trading the majority of the week in the red, three of these four key indices closed slightly up on the week, with the sole exception being the Russell 2000 (chart).

One of the concerns I have about the July labor report is that even though the private sector hired more workers than anticipated, this number is still way below the 250,000 monthly jobs necessary to have a meaningful impact on the unemployment picture. I have also watched a deterioration of consumer confidence as of late along with sluggish retail sales numbers. This does not bode well for the overall economy because the consumer plays a significant role in how our economy performs.

Now to the markets. If you are an investor, or a trader for that matter, you might be scratching your head and asking, “how could equities be at multi-month highs when we have anemic job growth and weakening consumer confidence?” The answer is very simple and that is – the Fed. Policymakers here and abroad have made it abundantly clear, if the markets and/or the economy needs us, we will accommodate! This mantra and position has helped fuel stocks all year long. Unless the central banks change their tune, a floor will continue to be placed underneath this marketplace.

Personally, it is difficult for me to have the confidence in going long or short equities in this environment. On one hand, you have a struggling economy and lagging corporate earnings. On the other hand, you have central banks from around the globe having a “whatever it takes” attitude while injecting a steady flow of cheap money into the system. That said, there are trading opportunities on both sides of the fence and seemingly technical analysis may become more influential on stocks or indexes then anything else right now. Good luck to all.

Have a great weekend 🙂

~George

Whatever it takes…

Posted on by George Mahfouz

That was the message sent mid-week by European Central Bank President Mario Draghi. That statement alone was enough to spike the markets into a breathtaking three-day rally pushing the Dow Jones Industrial Average (chart) above the 13,000 mark for the first time in since early May. For the week, the Dow Jones Industrial Average (chart) finished up almost 2%, the Nasdaq (chart) +1.12%, the S&P 500 (chart) +1.71% and the Russell 2000 (chart) +0.56%.

As a trader or investor it has become somewhat challenging to form a thesis on the markets. Despite weakening economic data and tepid corporate earnings, equities continue to outperform the data. Logically, one could surmise based on the weak data and somber outlook, a short thesis could be developed and implemented. However, when you have the central banks from around the world ready to provide consistent stimulus measures, and have a “whatever it takes attitude”, equities benefit.

I am not sure how much longer these stimulus resolutions will have a positive effect on stocks, however, if you try to short this market in this environment, make sure you have protective stops in on all of your positions. Good luck to all.

Have a great weekend 🙂

~George

Nothing too spectacular, so far…

Posted on by George Mahfouz

Earnings reporting season went into overdrive last week and quite honestly the markets were a lot quieter than I expected. For the week, the Dow Jones Industrial Average (chart) gained a modest 0.36%, the Nasdaq (chart) +0.58%, the S&P 500 (chart) +0.43% and the Russell 2000 (chart) actually pulled back 1.18%. So far earnings have come in rather tepid with a few exceptions. Also, volumes on the key indices have been relatively low which is playing a role in the lack of volatility. Technically speaking, nothing is standing out either. The major averages remain above their 50-day moving averages and also remain locked in their multi-week trading ranges.

Next week the financial world will be looking at Apple (NasdaqGS: AAPL) to see how their quarter fared. Apple has the ability to move the entire tech sector and the overall market for that matter, so I will certainly be keying into what the company reports financially, and what the tone is in their earnings conference call. Another highly anticipated earnings report next week will come from Facebook (NasdaqGS: FB). After a disastrous IPO, the street will be looking to see if the company has found its footing or if there is more downside to come. Let’s not forget about the other 750 companies that are reporting next week as we enter into the height of the Q2 earnings reporting season. Good luck to all.

Have a great weekend 🙂

~George

Next week promises to be a doozy…

Posted on by George Mahfouz

Stocks closed the week with a bang, but that’s nothing compared to what’s in store next week. Between dozens of companies reporting their Q2 results, and Ben Bernanke speaking before Congress on Tuesday and Wednesday, I am looking for a spike in volatility that may last all week long. Yesterday, the Dow Jones Industrial Average (chart) closed up 203.82 points, the Nasdaq (chart) +42.28, the S&P 500 (chart) +22.02 and the Russell 2000 (chart) +11.37. With all that’s in store next week, I am also looking at the technicals to see if these key indices can breakout of their respective trading zones. What was impressive to me yesterday is that all four indices either held, or moved and closed above their 50-day moving averages.

With earnings reporting season kicking into high gear, I would expect that this will be the catalyst to whether the markets breakout or breakdown. On Monday all eyes will be on Citigroup (NYSE: C), followed by reports out of Goldman Sachs (NYSE: GS), Intel (NasdaqGS: INTC) and Yahoo (NasdaqGS: YHOO) on Tuesday. Wednesday we will hear from Bank of America (NYSE: BAC), U.S. Bancorp (NYSE: USB), American Express (NYSE: AXP) and eBay (NasdaqGS: EBAY), just to name a few. Closing out the week, Q2 earnings reports will be issued from Morgan Stanley (NYSE: MS), Phillip Morris (NYSE: PM), Google (NasdaqGS: GOOG), Microsoft (NasdaqGS: MSFT) and General Electric (NYSE: GE).

So as you can see, next week should indeed be a doozy! Good luck to all and happy trading 🙂

~George