global

What A Rollercoaster Ride!

Posted on by George Mahfouz

This week started off with the vote no one expected. Global markets were shocked with the outcome of the United Kingdom’s vote to the leave the European Union. Here at home, the Dow Jones Industrial Average (see chart below) lost close to 1,000 points between Monday and Tuesday, the Nasdaq (see chart below) over that same two-day period lost close to seven percent as did the S&P 500 (chart) and the small-cap Russell 2000 (chart). A breathtaking 2-day drop which was so swift and profound that it violated the 200-day moving averages of all of the aforementioned indexes. Fast forward to today and what seemingly was the start of an angry correction, has turned into yet another “buy the dip” opportunity. No matter what the challenges are or have been on the macro-economic or political front, markets over the past several years have shrugged them off. I honestly did not think stocks would snap back this time as quickly and as powerfully as they have.

Yet again, oversold conditions created a trader’s dream with this snap-back rally. Ever since this bull market began, every shocking or unexpected headline which have rattled the markets have always been met with strong support that then turns into the resumption of this protracted bull market. However, it is also very clear that we have been trading in a range for quite some time now and every time we have tried to breakout of this trading range, resistance is met and we retrace back to a variety of moving averages.

So you may be asking how do we break out of this S&P 500 (chart) 2000 to 2120 trading range? One catalyst that can do this is the upcoming second quarter earnings reporting season which kicks off here in July. I do not think that the economy is such that record earnings results will come forward. In fact, companies may take it upon themselves to use the Brexit circumstance to soften their future guidance? We will see. In my humble opinion I think the possibility of a downward break is more probable in the near term than stocks breaking out to all-time highs, especially after this snap back rally. Good luck to all!

Paula and I wish everyone a safe and Happy 4th of July holiday 🙂

~George Mahfouz, Jr.
Dow Jones George Mahfouz JrNasdaq George Mahfouz Jr.

A Respite From The Sell-Off!

Posted on by George Mahfouz

Stocks snapped back sharply on Friday after a week of relentless selling pressure. On Friday the Dow Jones Industrial Average (chart), surged 313.66 points, the Nasdaq (chart) popped 70.67 points, the S&P 500 (chart) notched a gain of 35.70 points and the small-cap Russell 2000 (chart) closed Friday out up 18.27 points. For most of last week the markets were under tremendous pressure as oil continued to plummet along with bank stocks. On Thursday U.S. crude oil closed at a 13-year low only to snap back on Friday gaining over 12%. One of the reasons why oil has bounced off of multi-year lows is a rumor was floating around that the Organization of Petroleum Exporting Countries aka O.P.E.C. was prepared to cut production. We will see if this becomes the case. Furthermore, the European banks have been sold off ruthlessly all year long which has indeed carried over to our banks here at home. So when you have both oil and banks selling off the way that they have, it’s no wonder why there has been a global sell-off sending markets into correction territory.

As the global sell-off continues and as the chatter of doomsday gets louder and louder, I think it is important to remember that we have been in one of the strongest and longest bull markets of all time. Let’s not forget it is not only normal but quite healthy that stocks, bonds and commodities correct and balance out. It amazes me that when sell-offs occur that lead to corrections in the marketplace how the pundits come out of the woodwork and speak to how the world is coming to an end. My friends, what hasn’t been normal is for over six years how we have not had a market correction of over 10% that has stuck. Well here we are today and this is where we find ourselves.

Yes, equities can go lower and yes it can get more painful. But once valuations become attractive again and this is what market corrections provide, you better believe at some point in time buyers will resurface and take advantage of the what goes on sale. The markets are closed on Monday due to Presidents’ Day. Both Paula and I wish everyone a very safe and happy holiday 🙂

~George

 

Stocks Are In A Tailspin!

Posted on by George Mahfouz

After starting the year off in sell mode, stocks are accelerating their declines and are now in correction territory. Yesterday’s rally sparked hope that a short term bottom was put in, however, this is not the case as the Dow Jones Industrial Average (chart) plunged 400 points at today’s open, the Nasdaq (chart) opened lower by over 100 points, the S&P 500 (chart) opened down over 2% and the small-cap Russell 2000 (chart) is now trading below 1000. What gives? First and foremost, China’s Shanghai Composite Index has lost over 20% of its value since late December and is now in a bear market. China’s market fall has indeed spilled over into the global markets. Secondly, crude oil (chart) has continued to decline and is now trading below $30 per bbl spreading fears of widespread bankruptcies in the oil and gas space. These two factors alone have been enough to send our markets into correction mode.

That said, what I try to do in this type of market environment is to place emotions in check and to keep things into perspective. Since this bull market began in 2009, we have not really experienced a market correction. Yes, it has been over six years since we have had a meaningful market decline that has stuck. People tend to forget that market corrections can be a very healthy thing for an overextended market. Investors and traders alike have been spoiled over the past six years by essentially taking their positions and switching on auto-pilot. I believe those days are gone and they should be. When the Federal Reserve took action and began their aggressive monetary policies i.e. buying bonds and placing interest rates at or near zero, stocks took off and did not look back. We have not been in a normalized market environment since then.

Fast forward to today and with essentially no Fed intervention and with a change in interest rate policy, we now have markets trading off of economic and corporate merits. This to me is not a bad thing because now investors can assess the value of the markets as well as individual stocks more accurately and more confidently. This is a concept that most traders and investors have been waiting on and that is to make their investment decisions based off of facts and not what the Federal Reserve will or will not do.

Good luck to all 🙂

~George