Third Rate Cut Of The Year…

The Federal Reserve provided its third rate cut of the year on Wednesday. Although this was very much expected, until it happens you don’t know. Without question the Fed’s actions this year has helped the markets hit new highs throughout the year. This week has been no different. Despite pulling back a bit yesterday the Dow Jones Industrial Average (see chart here) remains above 27000, the S&P 500 (see chart here) hit a fresh all-time high on Wednesday, the Nasdaq Composite (see chart here) is within 50 points of its all time high and the small-cap Russell 2000 (see chart below) is trading above its 20, 50, 100 and 200-day moving averages. A technically healthy sign.

What has allowed the Federal Reserve to be proactive in cutting rates is the fact that inflation is pretty much non-existent. If inflation was present in a meaningful way I am not sure the Fed would be cutting rates at all. A huge side effect to lower rates is a strong stock market. So it’s no wonder we continue to trade at new highs and at the very bare minimum hold strong near the upper bands of the trading range. A couple of other factors that are supporting the markets are the latest round of corporate earnings reports which are coming in a bit better than expected along with some positive news flow out of the China trade negotiations.

With this latest rate cut I would not be surprised to see a continuation of the current upward trend and also potentially see new all-time highs before year-end. As I look at the technical shape of the aforementioned indexes pertaining to the relative strength index and the moving averages, I don’t see any issues there either. The Dow Jones Industrial Average (chart), the S&P 500 (chart), the Nasdaq Composite (chart) and the Russell 2000 (chart) are all above their respective moving averages which historically provides support on pullbacks and none of these indexes are in overbought territoryΒ  according to the relative strength index (RSI) principles.

Good luck to all πŸ™‚

~George

Third Rate Cut Of The Year - Paula Mahfouz

 

New Week, New Record Highs?

New week, new record highs? The Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) are fast approaching all-time highs. Both of these major indexes have been on a tear of late and could see new record highs this upcoming week. However, breaking news came out yesterday that Saudi Arabia has shut down half of its oil production after drones attacked the world’s largest oil processing facility. This attack will impact 5 million barrels of daily oil production. One sector that will certainly be affected is the energy space. The price of oil is now expected to skyrocket at least here in the short term. I am not sure if the markets will shrug this dynamic off, but I do expect energy stocks to outperform.

As I take a look at the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) both of these indexes appear to be ready to breakout and join the Dow Jones Industrials and the S&P 500 most recent performances. If the news out of the middle east has a negative impact on stocks, there are plenty of technical support levels that would come into play. All of the aforementioned key indexes are trading comfortably above their 20-day, 100-day and 200 day moving averages. During the month of August the 200-day moving average provided major support multiple times. As I look at the relative strength index to see how close we are to overbought conditions, there is still plenty of real estate before we see the 70 level of the RSI. So technically speaking the indexes appear to be in relatively good shape.

Without question the oil markets and the energy sector will be the focus this week. I am also curious to see how the overall markets react to this latest development out of the middle east. Good luck to all πŸ™‚

~George

 

 

First Rate Cut In Over A Decade!

Yesterday the Federal Reserve conducted its first rate cut in over a decade! Although widely expected, the markets were disappointed as to how Fed Chairman Jerome Powell signaled that this is does not necessarily mean more rate cuts are forthcoming. Chairman Powell’s statement sent stocks down sharply. The Dow Jones Industrial Average (see chart here) closed down over 330 points, the S&P 500 (see chart here) closed lower by 32.80, the Nasdaq Composite (see chart here) finished down almost 100 points and the small-cap Russell 2000 (see chart below) finished the day down 11 points. The markets were hoping that Mr. Powell would remain dovish and it was clear he was the opposite. That said, a rate cut is a rate cut and the intention is to keep the economy moving. Despite the rate cut move, The White House came out and complained about how Chairman Powell handled his statement and it is no secret that administration wants further rate cuts. I do think additional rate cuts may not be needed due to how Q2 earnings reporting season is going so far. The street was expecting an “earnings recession” at least in the last quarter. But as we are now half way through earnings reporting season, so far so good. There are not many earnings surprises to the downside and future guidance is not too shabby so far.

Let’s take a look at the current technical shape of the markets. The indexes have been going sideways as of late with the exception of yesterday’s selloff. That said, yesterday’s selloff did break the 20-day moving averages of the Dow Jones Industrials, the S&P 500 and the Nasdaq Composite, however, the small-cap Russell 2000 closed above its 20 day and actually demonstrated more relative strength than the other averages. A one day selloff does not necessarily mean the beginning of a new downward trend so let’s wait and see how the rest of earning reporting season goes and then we can assess how the back half of the year shapes up.

Good luck to all πŸ™‚

~George

Russell 2000 - Paula Mahfouz

 

 

Fed Rate Cuts Back In Play?

The question over the past week or so is whether or not Fed rate cuts are back in play? The May jobs numbers were way below expectations with the economy only adding 75,000 jobs. This is a far cry from the 180,000 that economists were expecting in the month of May. As intuitive as it seems a weak jobs report should equal a continuing sell-off in the markets. Not the case in the first half of the month for stocks. In fact the Dow Jones Industrial Average (see chart here), the S&P 500 (see chart here), the Nasdaq Composite (see chart here) and the small cap Russell 2000 (see chart below) all have rallied sharply so far this month. So how is it that stocks are rallying with a slowing job market? Two out of the past four months the jobs number has come in below 100,000. This is giving hope to the markets that the Federal Reserve may actually start cutting interest rates as opposed to raising them and this is why the markets are rallying. Lower interest rates has been a boon for stocks for the past decade and if the Fed starts lowering rates again, we could see all-time highs again.

What’s more is the technical shape of the aforementioned key indexes. As stocks have rallied this month, 3 out of the 4 major averages have blown through their moving averages which can provide resistance point if a stock or index is trading below their respective averages. Since the June rally began, the Dow Jones Industrial Average (click here for chart) recaptured it’s 200-day, 100-day and 20-day moving averages as did the S&P 500 ( click here for chart) and the Nasdaq Composite (click here for chart). However the small-cap Russell 2000 (click here for chart) has run into its 100 and 200 day moving averages and has found resistance at these key pivot points.

Let’s see how the rest of June goes and see if this past weeks consolidation will offer yet another leg up in the markets. Good luck to all πŸ™‚

~George

Russell 2000 - George Mahfouz Jr

Now Mexico Too?

If it wasn’t enough to hit China harder, now Mexico too? Look by no means am I an expert on trade, tariffs or politics, but one thing I do know the stock market doesn’t like what has been going on with all three! The stock market also dislikes uncertainty and curve balls and this administration is certainly throwing a lot of both out there lately. Stocks have taken it on the chin with yet another wave of selling this week. For the first time since January the Dow Jones Industrial Average (see chart here) has fallen below the 25,000 mark. The S&P 500 (see chart here) closed in the 2,750 zone, the Nasdaq Composite (see chart here) closed near the 7,450 level and the small-cap Russell 2000 (see chart below) closed at 1,465.

What’s more eye catching to me is that all of the major averages have now fallen below their respective 200-day moving averages. Let’s do take a look at the technical shape of the market to see how much damage has been done. Now that the 200-day moving averages have been breached lets look at the RSI of each index. The relative strength index is a technical indicator that expresses whether or not a stock or index is overbought or oversold (click here for RSI). The Dow Jones Industrials (chart), the S&P 500 (chart), the Nasdaq Composite (chart) and the small-cap Russell 2000 (chart) all are racing toward the oversold level of 30. In fact, the Dow Jones breached the 30 level of the RSI yesterday.

Historically when stocks or indexes break their key support levels and head down towards the 30 level of the RSI, there is usually a continuation through that metric as well. That said, history does not always repeat itself but I would also not be surprised to see more selling pressure in the near future. Good luck to all πŸ™‚

~George

Russell 2000 - Paula Mahfouz

 

Strong Economy Equals A Strong Stock Market!

The economy posted a 3.2% gain in the first quarter and as the saying goes, a strong economy equals a strong stock market! Is it any wonder as to why the Nasdaq Composite (see chart here) hit an all-time high on Monday! The same rings true with the S&P 500 (see chart below). The S&P 500 hit an all-time high on Monday as well. Now the Dow Jones Industrial Average (see chart here) has a bit more work to do in order to tap its own record as does the small-cap Russell 2000 (see chart here). However, I am sure the bulls will take 2 out of the 4 major averages setting all time highs. What is also helping the stock market is how the Federal Reserve has taken a cautious approach to raising rates any further. In fact, there are calls out of Washington DC asking the Fed to start lowering rates to stimulate the economy even further. Now I am not so sure that the Fed will accommodate Washington’s request, but I do think it is safe to say that we should not see a rate hike in the near future or maybe not at all for the rest of this year.

One note of caution to me is that with nearly half of corporate America reporting their Q1 earnings so far, we are seeing on average a year over year decline in earnings. There are still 100’s of companies set to report over the coming weeks but if this trend continues, this will be the first year over year decline in corporate earnings in years. I will be keeping an eye on this development.

The technical shape of the aforementioned indexes remain intact. The Dow, Nasdaq, S&P 500 and the Russell 2000 all are trading above their respective key moving averages. However, both the Nasdaq Composite (see chart here) and the S&P 500 (see chart here) have entered into overbought territory according to the relative strength index also know as the RSI. That said, I would not be surprised to see at the very least some consolidation or an outright healthy pullback. Good luck to all πŸ™‚

~George

S&P 500 - Paula Mahfouz

Stocks End Q1 On Fire!

Stocks ended the first quarter of the year on fire! The Dow Jones Industrial Average (see chart here) closed Q1 up over 11%, the S&P 500 (see chart here) closed the first quarter up over 12% which is the best performing quarter in years for this bellwether, the Nasdaq Composite (see chart here) closed up more than 17% and the small-cap Russell 2000 (see chart below) closed out the first quarter of the year up over 14%. Yes folks these gains are incredibly impressive especially considering how global growth is slowing. That said, these eye-popping market gains are not too surprising considering the sharp sell-off that stocks experienced in that latter part of 2018. Without a doubt the aforementioned indexes were way oversold in late December and an oversold bounce of some sort was definitely in the cards. As we know, market swings can and do overshoot to downside such as what we saw in late 2018 and now the question is, will we overshoot to the upside?

It sure does not appear that way at least from a technical perspective and according to the Relative Strength Index (RSI). The Dow Jones Industrial Average (see chart here), the S&P 500 (see chart here), the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) are no where near overbought conditions yet. This despite all of these key indices rallying double digits in Q1. What’s more, all but one of these indices are also trading above their key moving averages including their 20-day, 100-day and 200-day with the lone exception being the small-cap Russell 2000. Now there could be some consolidation going on here over the next few weeks and up until first quarter earnings reporting season begins which would actually be healthy for the markets.

Speaking of the upcoming earnings reporting season, this could be the one catalyst that sheds the most light for the rest of the year on how stocks will fare. It is no secret global growth has slowed and I think corporate America will speak to whether this current global slowdown is just a blip on the radar or something much more meaningful.

Good luck to all πŸ™‚

~George

Russell 2000 - Paula Mahfouz

 

Best Start Of The Year In Decades!

Stocks have opened the month of March rip roaring again adding to the best start of the year for the averages in decades. The Dow Jones Industrial Average (see chart here) opened the trading day up over 200 points, the S&P 500 (see chart here) opened up over 20 points, the Nasdaq Composite (see chart below) opened up over 55 points and the small-cap Russell 2000 (see chart here) opened up over 11 points. These gains are adding to the double digits percentage gains the markets have already realized in 2019.

So why such a strong start to the year? I am not trying to sound like a broken record but this 10 year long bull market is a head scratcher.Β  No matter what has been thrown at one of the longest bull markets in history, nothing seems have an adverse affect. You name the crises and stocks shrug it off. Whether it is a geopolitical event, the Federal Reserve raising rates or the daily chaos that comes out of Washington, nothing has disrupted this incessant rise in stocks. We did get a definitive correction late last year in where the bears came out of hibernation and predicted the end of the bull market and that a 40% correction is now imminent. Well don’t look now but we are not too far off from setting new all time highs in the aforementioned indexes.

Technically speaking it appears that the coast is clear for now as well. All of the major averages are now trading above their respective 20-day, 50-day and 200 day moving averages which is a very bullish sign. The one caveat to the technical shape of the market is that stocks are a bit overextended. Overbought conditions do exist technically and according to the relative strength index also known as the RSI. That said, the pullbacks that do occur continue to be met with support with buyers stepping in willing to add to their existing positions or open up new positions. The trend remains your friend in our current environment. Good luck to all πŸ™‚

~George

Nasdaq Composite - Paula Mahfouz

Historically A Strong Month For Stocks…

December is historically a strong month for the stock market. Many factors play into the last month of the year being a positive one including holiday bonuses, the general overall feeling of optimism and typically lighter volumes due to the holiday season. How we finish out this year will largely hinge on the results of this weekend’s G20 summit. Early indications are that the trade talks and other collaborative measures are going well. As the major averages enter into the last month of the year, The Dow Jones Industrial Average (click here for chart) finds itself at 25,538, the S&P 500 (chart) closed out the month of November at the 2,760 level, the Nasdaq Composite (chart) finished at 7,330 and the small-cap Russell 2000 (chart) finished November at 1,533. On the year, the major averages are barely in the green with the small-cap Russell 2000 actually a tad in the red.

Stocks this past week did get a boost from Federal Reserve Chairman Jerome Powell when Chairman Powell spoke at the Economic Club of New York. Chairman Powell stated that the Fed’s benchmark interest rate was now “just below” the neutral level. This sent the Dow Jones Industrial Average (see chart below) soaring over 600 points on Wednesday. Chairman Powell’s comments are being viewed by the street that the Federal Reserve just might be done raising interest rates for the foreseeable future. Now if we can get some concrete positive news and developments out of the G20 summit which is being held in Buenos Aires, then indeed we could be setting up for a year-end rally.

Let’s take a look at the moving averages technical set-up of the aforementioned key indexes starting with the Dow Jones Industrial Average (chart). At Friday’s close, the Dow is trading above its 200-day moving average by about 400 points while the S&P 500 (chart) closed right at its 200-day. Both the Nasdaq Composite (chart) and the small-cap Russell 2000 (chart) are trading below their respective 200-day moving averages but they have recently cleared and are trading above their 20-day moving averages.Β So technically speaking things do not look too shabby. Let’s see if we can have a rally into year-end.

Good luck to all πŸ™‚

~George

Dow Jones Industrial Average - George Mahfouz Jr

First Half Of 2018 In The Books…

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)Β 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 πŸ™‚

~George

S&P 500 - Paula Mahfouz