macro

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.

Fears Of A Greek Default Rattles Stocks…

Posted on by George Mahfouz

The International Monetary Fund (IMF) which is owed a payment of $1.6 billion euros walked out on Thursday’s meeting when both sides were attempting to negotiate a pact to save Greece from defaulting on its debts and prevent the country from heading into bankruptcy. This stalemate was enough to send global markets lower as well as our own. The Dow Jones Industrial Average (chart) closed Friday’s session down 140 points, the Nasdaq (chart) finished lower by 31 points, the S&P 500 (chart) lost almost 15 points and the small-cap Russell 2000 (chart) closed lower by almost 4 points. This type of uncertainty is never good for the markets especially when markets are essentially at all time highs. People are already a bit nervous that stocks may be overheated and should default chatter increase, this could set the wheels in motion for the “sell-off” certain pundits have been calling for.

This upcoming week the Fed will also hold its two day meeting as market participants will be watching closing to see if any of the Fed’s language will change pertaining to the state of the economy and interest rates. I do not think anyone is expecting too much from the FOMC at this meeting. If market volatility increases, I am quite sure it would be Greece related rather than what the Federal Reserve may or may not say out of their policy meeting.

Friday’s selling pressure did send both the Dow Jones Industrial Average (chart) and the S&P (chart) 500 below their respective 50-day moving averages which is where they also closed. For the past few weeks all of the aforementioned key indices have been flirting with their 50-day moving average and each time they crossed this key support line buyers came in taking the indexes back through this well defined metric. I think it’s too early to tell if what’s happening in the global macro picture will continue to effect our markets or if this is just another pause in our incessant bull market. Have a great week and good luck to all 🙂

~George