economic data

Record Closing High For The S&P 500!

Posted on by George Mahfouz

Despite choppy trading for most of the week and weak economic data being released, the S&P 500 (chart) closed the week out at a record closing high of 2122.73. The Dow Jones Industrial Average (chart) is now only a mere 16 points away from its all-time high of 18,288.63, the Nasdaq (chart) appears to be closing in on its record high of 5119.83 and the small-cap Russell 2000 (chart) is attempting to claw its way back to record territory.

I thought you were supposed to “sell in May” and go away? Apparently not! However, I will say this, these records that are occurring are happening on lighter volume than I would want to see to validate the most recent price action. Nonetheless, you cannot deny the incessant strength that the markets are showing. Not less than two weeks ago it appeared that we might of been en route to the 10% correction or so that had been chattered up by the pundits. In early May, the S&P 500 (chart) had breached its 50-day moving average only to snap back and set a new record closing high yesterday.

Speaking of the moving averages, the aforementioned key indices are now comfortably trading above their 50-day moving averages with the exception of the small-cap Russell 2000 (chart). The Russell yesterday did closed right at its 50-day. We will see next week if this index can join the other major averages and reclaim its 50-day moving average and close in on its record high. Now let’s take a look at the Relative Strength Index which another favorite technical indicator of mine. The RSI is a technical indictor that demonstrates whether or not a index or stock is oversold or overbought, click here for the complete definition of the RSI. Even though we are at record highs, none of the major averages are in overbought territory according to the RSI. Add to the mix that next week will lead up to Memorial Day weekend and volumes should begin to decrease, I do not see any major catalyst that would interfere with the most recent upward trend of the market.

Speaking of Memorial Day, both Paula and I wish everyone an upcoming safe Memorial Day holiday weekend and let’s not ever forget all who had bravely served our country.

~George

Super week for stocks!

Posted on by George Mahfouz

Stocks rallied for the second straight week as the key indices have now just about recaptured all of their losses incurred in August. The Dow Jones Industrial Average (chart) had one of its best weekly showings of the year gaining over 3%, the Nasdaq (chart) closed the week up 1.7%, the S&P 500 (chart) +1.98% and the small-cap Russell 2000 (chart) finished the week up 2.37%. Over the past couple of years, time and time again whenever equities as a whole have had a five percent pullback or so, such as what we experienced in August, a significant rally ensues and the bull market seemingly resumes. They say markets are forward looking indicators, well we must be in store for quite the year-end closeout, or are we?

This upcoming week the FOMC meeting will take center stage. The debate is on as to whether or not the Fed will start reducing its bond and mortgage back securities purchases and what effect this could have on the markets. My feelings are that there is still enough tepid economic data coming in for the Fed not to begin to taper. However, there are plenty of pundits out there that argue that the economy is beginning to show pockets of strength which could give the Fed the green light to begin with a small reduction with their future purchases. Either way, the technicals are now on their way to overbought territory, and interest rates are continuing to rise with the 10-year treasury note (chart) closing in on 3%. This could be a one-two punch to once again slow down and even potentially reverse this most recent rally.

That said, if you are a technical trader, this is an almost perfect environment to trade in. Support levels are continuing to be honored as well as resistance marks. We now find ourselves butting up against the upper end of the trading range in the S&P 500 (chart) and we could very well be headed back to support levels which in this case would be the 1630 zone on the S&P (chart). If the markets embrace the Fed’s action or lack thereof, a breakout above the all time high of 1709 of this key index could very well be in the cards.

Good luck to all and have a great week 🙂

~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

Central banks boost stocks…

Posted on by George Mahfouz

After China announced a surprise rate cut last week, central bankers from Japan to Britain went on the record this week indicating they are ready to flood the system with liquidity if need be. This was enough to continue to fuel the key indices to one month highs. The Dow Jones Industrial Average (chart) closed the week up 1.70%, the Nasdaq (chart) +0.50%, the S&P 500 (chart) +1.30% and the Russell 2000 (chart) +0.28%.

I thought you were supposed to sell in May and go away? Apparently not this year. The concern I have here is that the markets are rallying on stimulus hopes and not fundamentals. In looking at the most recent economic data released this week, manufacturing activity is falling sharply, consumer sentiment is at its lowest level in months and unemployment is still a big threat.

Looking ahead to next week, obviously the outcome of the Greek elections will be the highlight for the markets on Monday. One thing is for sure, no matter the what the results are, central banks from around the world are ready to do what it takes to stabilize the financial markets and financial system. This stance taken by the global bankers should continue to bode well for not only equities, but in particular gold. Good luck to all.

Have a great weekend 🙂

~George