holiday

First Half Of 2018 In The Books…

Posted on by George Mahfouz

The first half of 2018 is in the books and where in the world did that go? Year to date the Dow Jones Industrial Average (chart) is off about one percent, the S&P 500 (see chart below) is up a couple of percentage points but the Nasdaq Composite (chart) and the small-cap Russell 2000 (chart) are way outperforming the other benchmark indexes closing the first half of the year up almost 10% each.

Let’s take a look how the second half of the year is shaping up. We start off the second half of the year with of course the fourth of July holiday which this year happens to be in the middle of the week. I don’t expect too much market action this upcoming week especially with a shortened trading session on Tuesday followed by the markets closing on Wednesday in recognition of the 4th of July. There could be some positioning going on both Thursday and Friday after the holiday. but all in all I am expecting lighter volume throughout the week with not too much volatility. Now the following week and the second half of the year is a whole different story. Q2 earnings reporting season will begin in earnest the week of July 9th and this my friends will be the true beginning of the second half of the trading year. I expect volatility to kick in once again as corporate America unveils their most recent quarterly results. Furthermore, we will be getting ever closer to the midterm elections that promises to be filled with about as much drama and rhetoric one can imagine. Also, historically stocks have witnessed meaningful corrections at some point during the year leading up to the midterms and I do not expect this year to be any different. I also expect corporate America to report impressive growth to their top and bottom lines; however, these results may already be priced in.

Technically speaking the aforementioned indexes all remain above their respective moving averages with the Dow Jones Industrial Average (chart) hovering right around its 200-day. Paula and I wish everyone a very safe and Happy 4th of July 🙂

~George

S&P 500 - Paula Mahfouz

 

Geopolitical Risks Abound…

Posted on by George Mahfouz

Stocks closed the shortened holiday week down on Thursday as the U.S. dropped the largest non-nuclear bomb on a target in Afghanistan. This just after the U.S. launched tomahawk missiles targeting a Syrian airbase in response to a chemical attack on innocent civilians in Syria. Now North Korea is increasing its verbal threats of an all out war on the United States. What’s going on here? It’s hard to talk about stocks when all of this hatred is occurring around the world. Nonetheless, the markets will move forward but will be certainly affected by the troubling geopolitical environment and the uncertainties that exist in multiple regions around the globe.

For the week, the Dow Jones Industrial Average (chart) closed down 1%, the S&P 500 (chart) closed off 1.19%, the Nasdaq (chart) -1.2% and the small-cap Russell 2000 (chart) finished the week lower by 1.39%. Gold (see chart below) was up on the week and for the first time since November of last year, closed above its 200-day moving average. This is no surprise due to what is currently going on in the world. The question now is how to trade this market environment or what to do with your current positions? If history repeats itself, market volatility should increase which is good for traders but can be unnerving to longer term investors. In fact volatility (chart) spiked this week to its highest level in 5 months.

Now that earnings reporting season is underway some market pundits are saying that this will dictate whether or not markets will continue higher or if earnings reporting season will be the catalyst to send stocks into correction mode. I disagree with this point of view. How can the markets concentrate on earnings reporting season when you have this widespread turmoil around the globe? Of course, earnings are what typically drive stocks and valuations but until the geopolitical back drop abates and a sense of resolve comes forward I will be ultra conservative in going long any equities unless it is gold or gold related assets. Of course it is always best to consult a certified financial planner(s) before making any investment decisions. Good luck to all and both Paula and I wish all a safe and Happy Easter weekend.

~George

gold chart george mahfouz jr

All Eyes On Jobs Report…

Posted on by George Mahfouz

The chatter has increased lately as to when the Federal Reserve will raise interest rates from their historic lows. We may not need to wait much longer to get that answer. Although it is a holiday weekend, the August jobs report will be released tomorrow and the pundits are suggesting that if the economy added more than 200,000 jobs in August, the Federal Reserve will raise rates this month. From my view a quarter point rate hike here in September is no big deal. I think the markets will have a muted reaction. However, if this is the beginning of a consistent pattern then this becomes an entirely different discussion. I do not expect that the Fed will be too aggressive with future rate hikes and of course the economic data will play a role in those decisions.

So what about the markets? We are coming into a seasonality that is typically a weaker time for stocks. What’s more, the markets will also begin to focus on the presidential election and the polls associated with it. That said, I expect an increase in volatility as we head into the fall. There are other catalysts that could weigh in on stocks such as potential changes in global monetary policies and Q3 earnings reporting season in October. The key indices continue to demonstrate strength with the S&P 500 (see chart below) being supported by its 50-day moving average click here, the Dow Jones Industrial Average (see chart below) is within a couple percentage points of its all-time highs, and both the Nasdaq (chart, click here) and the small-cap Russell 2000 (chart, click here) are trading right around their 20-day moving averages. So as of yet, stocks do not appear to be too concerned with the upcoming market seasonality and other potential catalysts that could play a role in interrupting the uptrend we have been in.

Both Paula and I wish everyone a very safe and happy Labor Day weekend 🙂

~George

S&P chart george mahfouz jr

dow jones chart george mahfouz jr

The Melt Up Continues…

Posted on by George Mahfouz

Stocks continued their march north this past week as once again both the Dow Jones Industrial Average (chart) and the S&P 500 (chart) hit record highs on Thursday. Joining in on the action was the Nasdaq composite (chart) which hit a 52-week high on Thursday as well, while the small-cap Russell 2000 (chart) essentially closed flat on the week. We will talk more about this index in a bit.

With the mid-term elections in the rear view mirror and as the Thanksgiving holiday approaches, I do not see any reason as to why stocks in general won’t continue to post gains. Third quarter earnings reporting season for the most part has ended, and the scorecard was okay. You might look at the technical’s in the marketplace and see that we are at or heading into overbought territory. But when you have volatility coming in, the Thanksgiving holiday fast approaching and with no other real catalyst in the near term, it’s a perfect set-up for the status quo to remain in place. Here is the one exception; the small-cap Russell 2000 (chart). As the aforementioned key indexes have made all time highs, the Russell 2000 is lagging. Yes, this index too has rallied over 10% since the selloff in October, however, the Russell is running into significant resistance at the 1200 level, and actually has reversed course over the past two trading sessions (chart). It’s a bit early to call it a true reversal or a tell, but I will be keeping a close eye on how this key barometer pertaining to overall market sentiment will perform between now and year-end.

As far as the overbought conditions we find ourselves in according to the relative strength index, also known as the RSI, this is a prototypical environment where volatility is coming down and with not too many catalysts in the near term, I would not be surprised if we remain overbought through the end of the year. Good luck to all and both Paula and I wish everyone a Happy Thanksgiving holiday.

Have a great week 🙂

~George

Q1 Earnings Reporting Season Saves The Day, So Far…

Posted on by George Mahfouz

Last week the Dow Jones Industrial Average (chart), the Nasdaq (chart), the S&P 500 (chart) and the small-cap Russell 2000 (chart) all went into a tailspin closing lower by 2.4%, 3.1%, 2.6% and 3.6% respectively. Fast forward to this week as earnings reporting season shifted in to high gear and we have a different story. For this holiday shortened week, the Dow Jones Industrial Average (chart) finished up 2.38%, the Nasdaq (chart) closed up 2.395%, the S&P 500 (chart) gained 2.7% and the small-cap Russell 2000 (chart) closed the week up 2.38%.

So why the reversal? Simply put and for the most part, corporate earnings are coming in better than expected. At the beginning of the week Citigroup (NYSE: C) posted better than expected results on net income of $3.94 billion up from $3.81 billion in Q1 2013. This was after Wells Fargo (NYSE: WFC) posted a sharp rise in its net income in comparison to last year’s quarterly results. Also this week, Johnson and Johnson (NYSE: JNJ) reported a net income of $4.4 billion an almost 8% increase over the same period last year. The Coca-Cola Co. (NYSE: KO) reported their Q1 earnings booking 44 cents share which is what the street expected as global sales volume rose 2%. Furthermore, Intel (NasdaqGS: INTC) reported 38 cents a share in earnings which came in 1 cent above what analysts expected, this was enough to send Intel to fresh 52-week highs.  Yet another impressive earnings report came out of flash based data storage firm SanDisk (NasdaqGS: SNDK) which surprised the street and reported record Q1 results of $1.44 per share leapfrogging street estimates of $1.25 per share. This was enough to send the shares of the company up over 7% in today’s trading session.

As previously mentioned, earnings reporting season kicked into high gear this week and next week we go into overdrive. At the beginning of this upcoming week, we will here from Halliburton (NYSE: HAL), Wynn Resorts (NasdaqGS: WYNN), AK Steel (NYSE: AKS), Amgen (NasdaqGS: AMGN), Bank of New York Mellon (NYSE: BK), Cree Inc. (NasdaqGS: CREE), Discover Financial Services (NYSE: DFS), Gilead Sciences (NYSE: GILD), Juniper Networks (Nasdaq: JNPR), Intuitive Surgical (NasdaqGS: ISRG) and United Technologies Corp (NYSE: UTX). Mid-week earnings will come out of tech behemoth Apple (NasdaqGS: AAPL), Biogen Idec (NasdaqGS: BIIB), Delta Airlines (NYSE: DAL), Dow Chemical (NYSE: DOW), F5 Networks (NasdaqGS: FFIV), Facebook (NasdaqGS: FB) and Qualcomm (NasdaqGS: QCOM). Closing out the week we will hear from 3M Company (NYSE: MMM), Amazon (NasdaqGS: AMZN), American Airlines (NYSE: AAL), Chinese search engine Baudi (NasdaqGS: BIDU), Cabot Oil & Gas (NYSE: COG), Celgene Corp (NasdaqGS: CELG), Eli Lilly and Company (NYSE: LLY), General Motors (NYSE: GM), KLA-Tencor (NasdaqGS: KLAC), Microsoft (NasdaqGS: MSFT), United Parcel Service (NYSE: UPS) and Ford Motor Company (NYSE: F). Of course there are hundreds of others reporting their earnings next week so we will see if the market continues to rebound from its mini sell-off earlier in the month. Good luck to all.

The markets will be closed tomorrow in recognition of Good Friday and both Paula and I wish everyone a very safe and healthy holiday weekend 🙂

~George

 

Now That’s What I Call A Bounce!

Posted on by George Mahfouz

After such a torrid bull run in 2013, where the the four major averages gained over 25%, to no great surprise, these same indexes experienced more than a 5% pullback in January and early February. However, over the past couple of weeks and true to form, these indexes not only bounced off of key technical support zones, but they also took back their 50-day moving averages. For the week, the Dow Jones Industrial Average (chart) finished up 2.28%, the Nasdaq (chart) had a gain of 2.86%, the S&P 500 (chart) +2.32% and the small-cap Russell 2000 (chart) closed the week up 2.92%. The markets responded with a roar as the new Fed chairwomen Janet Yellen, in her first public appearance at the helm of the Fed, reiterated her commitment to model after the Bernanke era monetary policies. Stocks were already recovering from the January correction but accelerated their gains as she spoke to Congress this past Tuesday. All expectations now are that stocks will remain buoyed by the continuing asset backed purchases despite the modest tapering that is now in effect.

In my previous blog I expressed concern over the technical breakdown of the markets and that the 50-day moving averages of the key indices had been breached. Furthermore, I thought there was a possibility of the 200-day being the next stop. However, I did also indicate that if the markets were able to rebound and take back their 50-day and remain above that mark, that would be a positive. This is where we find ourselves now. All of the aforementioned key indexes have traded and closed above this key technical metric. The question now becomes whether or not this slingshot bounce and break above the 50-day is sustainable? Q4 earnings reporting season really didn’t say too much about the growth of corporate America, which overall was a mixed bag at best for the majority of the sectors. Couple this with economic signs of weakness as retail sales growth still remains flatlined, and I think we will continue to experience choppy waters for stocks, and I would be surprised if we began making new high after new high like last year. That said, liquidity for stocks is seemingly plentiful and we are still in a strong seasonality period for equities, so I also wouldn’t be surprised if we stabilized above the 50-day and consolidated for an extended period of time. Unless of course there is an unexpected negative geopolitical or global macro event that creeps back into the mix, then all bets are off. I will continue to track the technicals to gauge entry and exit points while using protective stops along the way. Good luck to all and both Paula and I wish everyone a very safe and happy Presidents’ Day holiday. Please note the markets are closed on Monday in recognition of Presidents’ Day.

Have a great weekend 🙂

~George

Q4 Earnings Reporting Season Is Here…

Posted on by George Mahfouz

And so far, it’s a mixed bag. As this earnings reporting season kicks into high gear, most of the banks that have reported so far have come in above consensus estimates with Citigroup (NYSE: C) being one notable exception. Citigroup did report a $2.69 billion dollar profit, however, this was below consensus estimates and the bank did cite weakness in their mortgage and fixed income divisions. The stock closed lower by over 4% on the day. Another sector that is being challenged so far this year is the retail sector, at least certain companies within the sector such as Best Buy (NYSE: BBY). Although Best Buy did not report their earnings, they did come out with their holiday same store sales today which were significantly below analysts’ expectations and the company lowered their guidance due to disappointing holiday sales. On that news, the street hammered Best Buy’s stock today sending its shares lower by $10.74 per share or almost 30% on over 85 million shares in volume. This type of massive volume compared to a typical volume day of around 6 million, could be considered a washout or capitulation type trading day, hence a potentially sharp bounce back and potential recovery in its share price? Let’s see how the next couple of trading sessions play out on Best Buy before we draw any conclusions on a potential snap back rally.

Now let’s take a look on how the key indices are faring so far this year starting with the Dow Jones Industrial Average (chart) which is down 1%, the Nasdaq (chart) is up 1%, the S&P 500 (chart) is essentially flat, and the small-cap Russell 2000 (chart) has gained about 1% since the beginning of the year. So as you can see, a mixed bag here as well with the benchmark indexes.

Looking ahead to tomorrow’s key earnings reports, we will hear from the likes of General Electric (NYSE: GE), Morgan Stanley (NYSE: MS), Bank of New York Mellon Corp (NYSE: BK), and Schlumberger (NYSE: SLB) just to name of few. Next week we will hear from powerhouses International Business Machine (NYSE: IBM), Johnson & Johnson (NYSE: JNJ), Halliburton (NYSE: HAL), Abbot Labs (NYSE: ABT), Freeport-McMoRan Copper & Gold (NYSE: FCX), U.S. Bancorp (NYSE: USB), and Honeywell (NYSE: HON). Of course there are hundreds of other companies reporting next week as well, but I will be paying closer attention to the aforementioned companies due to their reach in the economy here and abroad.

I think this earnings reporting season will be scrutinized more than any other in recent years. Everyone wants to see top-line growth out of corporate America to confirm what the most recent economic data has revealed. With that said, and with what we have seen come out of certain slices of the retail sector, I am expecting a bumpy ride between now and the end of Q4 earnings reporting season. Good luck to all and make sure to consider having protective stops in your portfolios. The markets will be closed on Monday due to the MLK holiday.

Have a great holiday weekend 🙂

~George

 

 

Flat week…

Posted on by George Mahfouz

The four key indices finished the week basically unchanged, however, after the run stocks have had so far this year, the bulls will take it. For the week, the Dow Jones Industrial Average (chart) finished lower by 0.08%, the Nasdaq (chart) by -0.06%, the S&P 500 (chart) and the Russell 2000 (chart) actually ticked up on the week by 0.12% and 1.04% respectively.

The bears must be scratching their heads and asking; “Where is the pullback or 5-10% correction?” Without question the market has been churning and consolidating for the past several trading sessions and if  you have been short, or have been putting on new short positions, there may be a need for concern. My expectations have been calling for some type of pullback which in fact would be healthy for stocks. However, one thing I have learned over the years is you cannot fight the tape or for that matter, the fed. As long as you have the Federal Reserve commiting and deploying an exorbitant amount of resources and liquidity to the markets, you will most likely have a bid underneath most equities.

Technically speaking, the major indexes remain in overbought territory and when there is a pullback or correction in the averages, I would expect it will be met with willing and able buyers. Good luck to all.

The markets are closed on Monday for President’s Day so enjoy the extended holiday weekend 🙂

~George Mahfouz