Netflix

Better Than Expected…

Posted on by George Mahfouz

Q3 earnings reporting season has just begun and early on earnings are coming in better than expected. Almost 15% of the S&P 500 have reported their latest quarterly earnings and over 80% of that group have beat expectations. Included in this group that have already reported are Netflix (Nasdaq: NFLX), Bank of America (NYSE: BAC), JP Morgan Chase (NYSE: JPM), and Morgan Stanley (NYSE: MS) just to name a few. A look ahead to next week and hundreds of companies are set to report including but not limited to Halliburton (NYSE: HAL), TD Ameritrade (Nasdaq: AMTD), Biogen (Nasdaq:BIIB), Discover Financial Services (NYSE: DFS), Harley-Davidson (NYSE: HOG), McDonald’s Corp (NYSE: MCD), Proctor and Gamble (NYSE: PG), United Parcel Service (NYSE: UPS), Boeing Co (NYSE: BA), Caterpillar (NYSE: CAT). eBay (Nasdaq: EBAY), Ford Motor Co. (NYSE: F), Las Vegas Sands Corp (NYSE: LVS), Microsoft (Nasdaq:MSFT), O’Reilly Automotive (Nasdaq:ORLY), Paypal Holdings (Nasdaq:PYPL), Spirit Airlines (NYSE: SAVE), Tesla (Nasdaq: TSLA), Xilinx (Nasdaq: XLNX), 3M Co (NYSE: MMM), Aflac Inc (NYSE: AFL), American Airlines Group (Nasdaq: AAL), Capital One Financial Corp (NYSE: COF), Citrix Systems (Nasdaq: CTXS), Deckers Outdoor Corp (NYSE: DECK), First Solar (Nasdaq: FSLR), Gilead Sciences (Nasdaq: GILD), Southwest Airlines (NYSE: LUV), T-Mobile (Nasdaq: TMUS), Twitter (NYSE: TWTR), Visa Inc (NYSE: V), Goodyear Tire & Rubber (NYSE: GT), Phillips 66 (NYSE: PSX), and Royal Caribbean Cruises (NYSE: RCL). Hundreds more companies are set to report but you get the picture.

So with earning reporting season kicking into high gear, let’s see how investors continue to respond. On the week the Dow Jones Industrial Average (chart) closed at 26770, the S&P 500 (chart) closed just under the 3000 mark, the Nasdaq Composite (chart) closed at 8089 and the small-cap Russell 2000 (chart) closed the week at 1535. With the exception of today’s pullback the aforementioned indexes have all been in a recent uptrend. I think it is safe to say that next week’s earnings results will play a role in the markets direction.

Good luck to all šŸ™‚

~George

Triple Top Or Breakout?

Posted on by George Mahfouz

After chopping between the 2700 and 2800 zone for the past couple of months, is the S&P 500 (chart) at a triple top, or is it ready to breakout? I think we are going to find out this week in which second quarter earnings reporting season kicks into high gear. Although volatility has reared its head in first half of 2018, vol now has come back to what the markets have been accustomed to over the past few years (see chart below). Whether we breakout and test all time highs is a head scratcher. Of course earnings will play a key role in which way the markets will go, but there are other market moving factors in the mix. Any minute President Trump could put out a tweet on trade which could kill the most recent rally in stocks or propel it to new highs. On Tuesday and Wednesday, Federal Reserve Chairman Jerome Powell will speak in front of the Senate Banking Committee and the House Financial Services Committee. Without a doubt investors will be paying close attention to the tone and context of Chairman Powell’s testimony in front of both committees. Oh yes, we must not forget the Trump/Putin summit and I can’t even guess what comes out of that meeting and how the markets will react. So as you can see, chance are we will breakout of the triple top we are in or pullback within the trading range as mentioned above.

This week kicks off with high flying Netflix (NasdaqGS:NFLX) which reports their quarterly results tomorrow after the close, followed by Goldman Sachs (NYSE: GS) on Tuesday along with Johnson & Johnson (NYSE: JNJ), T-Mobile (NYSE: TMUS) and rounding the week out we will hear from the likes of Alcoa Corp (NYSE: AA), American Express (NYSE: AXP), eBay Inc. (NasdaqGS: EBAY), International Business Machines (NYSE: IBM), Etrade Financial Corp. (NasdaqGS: ETFC), Intuitive Surgical (NasdaqGS: ISRG), Microsoft Corp. (NasdaqGS: MSFT), General Electric (NYSE: GE) and Honeywell International Inc. (NYSE: HON) just to name a few. Good luck to all šŸ™‚

~George

VIX - George Mahfouz Jr.

Risks Abound!

Posted on by George Mahfouz

As we enter into Q1 earnings reporting season there are risks abound! Whether it’s the brewing trade war with China, rising interest rates here at home or geopolitical tensions in the middle east, the risk profile of this market has certainly increased in recent weeks. Money center banks such as JP Morgan Chase (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) kicked off earnings reporting season and all reported solid earnings numbers only to see their stocks falter on Friday. So we could be setting up for a better than expected earnings reporting season and the markets won’t care due to the aformentioned risks that are present. We will certainly find out this upcoming week as hundreds of companies are set to report their quarterly results. We kick off the week with earnings from Bank of America (NYSE: BAC), Charles Schwab Corp (NYSE: SCHW), Netflix (NasdaqGS: NFLX) followed by Goldman Sachs (NYSE: GS), Johnson & Johnson (NYSE: JNJ), Intuitive Surgical (NasdaqGS: ISRG), United Continental Holdings (NYSE: UAL), United Healthgroup (NYSE: UNH), Abbot Labs (NYSE: ABT), American Express (NYSE: AXP), Morgan Stanley (NYSE: MS), United Rentals (NYSE: URI), Etrade Financial Corp. (NasdaqGS: ETFC), General Electric (NYSE: GE) Honeywell International (NYSE: HON), Procter & Gamble (NYSE: PG), Schlumberger (NYSE: SLB) and Transunion (NYSE: TRU) just to name a few.

Let’s take a gander at the technical shape of the markets. The Dow Jones Industrial Average (see chart below) has bounced off of its 200-day moving average multiple times over the past couple of weeks and is now hovering at its 20-day, the same can be said for the S&P 500 (chart), the Nasdaq Composite (chart) is right on its 20-day and 100-day moving averages as is the small-cap Russell 2000 (chart). So all of the key indices are at or slightly above key support levels and just maybe between earnings reporting season and key support levels in play, stocks can withstand the risks that are currently present. Good luck to all šŸ™‚

~George

Dow Jones - George Mahfouz Jr

 

An Earnings Bonanza!

Posted on by George Mahfouz

Earnings reporting season is now in full swing and so far the numbers are not too shabby. A couple of earnings standouts so far are Netflix (NasdaqGS: NFLX) and Boeing (NYSE: BA). Netflix saw subscriber and revenue growth both exceed analyst’s expectations and their stock has skyrocketed since their earnings release last week. Boeing which reported before the bell yesterday also knocked the cover off the ball as the company nearly doubled its net income from the prior period a year ago. A company doubling its net income may not sound like a lot, but when you go from $1.63B in net income to $3.13B that is clearly moving the needle in a fascinating way. Boeing shareholders were also rewarded yesterday as the stock traded north of $350.00 per share hitting all-time highs. I am just highlighting a couple of standouts so far with hundreds of companies set to report over the coming days and throughout the next few weeks.

After a 2 day mini sell-off to start the week the key indexes did bounce back yesterday and resumed itsĀ  uptrend. The Dow Jones Industrial AverageĀ (chart) closed the month of January above 26,000, the S&P 500 (chart) closed out the month at 2823.81, the Nasdaq Composite (chart) closed at 7411.48 and the small-cap Russell 2000 (chart) closed at 1575. Even with the first noticeable sell-off earlier in the week the aforementioned indexes did have a stellar performance in January gaining more than 5% on the month.

I will say this, earlier in the week and for the first time in almost 2 years the market did feel vulnerable and the sell-off felt a bit different than recent pullbacks. Pundits are suggesting that interest rates may be playing a role in the volatility for the first time in years. I have been tracking the yield on the U.S. 10 year Treasury Note (Symbol: TNX) and for the first time in a long time the yield exceeded 2.7%. A break above 3% for an extended period of time could cause volatility to continue in stocks and may be the very first catalyst to put the brakes on this almost decade long bull run. Let’s see how the rest of earnings reporting season plays out and how interest rates fare in February before we can draw any type of conclusion. Good luck to all šŸ™‚

~George

Record After Record!

Posted on by George Mahfouz

Another week in the books and records continue to fall. The Dow Jones Industrial Average (chart) and the S&P 500 (chart) both closed the week at record highs, while the Nasdaq (chart) and the small-cap Russell 2000 (chart) are within a stones throw from their all-time highs. These key indices have been setting records all year long. With the exception of a few minor pullbacks throughout the year, stocks have pretty much gone up in a straight line. This despite a very tepid economic recovery here in the United States with the GDP coming in at a modest increase of 1.4%.

I think it is safe to say that this latest record setting week was due in part to Federal Reserve Chairman Janet Yellen’s dovish comments regarding interest rates and that the Fed would be very gradual in its future hikes and that such action will be determined by how well the economy fares. If the latest retail sales numbers and consumer price index number are indicative of what the Fed will do, we may not see another hike until year end or even 2018? This is just what the markets needed in order to keep a floor not only under the stocks, but the confidence to proceed as business as usual hence record setting highs.

Well the old adage of you can’t fight the tape or the Fed for that matter is certainly playing out so far in 2017. Are there any catalysts out there that could change the markets mind or its direction? Well we are about to enter the busiest week of Q2 earnings reporting season so far with over 440 companies reporting their results next week including the likes of Netflix (NasdaqGS: NFLX), Goldman Sachs (NYSE:GS), International Business Machine (NYSE: IBM), Johnson & Johnson (NYSE: JNJ), United Airlines (NYSE: UAL), American Express (NYSE: AXP), eBAY INC. (NasdaqGS: EBAY) and General Electric (NYSE: GE) just to name a few. The following week over 1400 companies will report their quarterly results. So if there is anything that could slow this bull market down right now this is it. However, if corporate America continues to report solid earnings results, new record highs could very well continue into the foreseeable future. Good luck to all šŸ™‚

~George

 

Nasdaq Closes At A Record High!

Posted on by George Mahfouz

Tech stocks have taken off this week due to their strong earnings results. Companies such as Netflix (NasdaqGS: NFLX) soared 18% today after the company reported better than expected subscriber growth. Also today and justĀ after the close, Google (NasdaqGS: GOOGL) Ā too reported better than expected results with revenue coming in at $14.35 billion compared to $14.26 billion the street was expecting. In after hours trading Google is up over 10% or well over $70.00 per share. Thanks to Google’s earnings results, most other tech companies are also trading up in the after-hours sessionĀ so it appearsĀ thatĀ the rally on the Nasdaq (chart) will continue at least through tomorrow.

On a technical note, I want to point to your attention how two of the most influentialĀ major averages held their respective 200-day moving averages recently. A little over a week ago the markets were roiled in the Greece debt drama as well as how China’s stock market was falling off a cliff. There was enormous uncertainty as to how Greece and even more so how China’s stock market would play out. This fear and uncertainty sent the Dow Jones Industrial Average (chart) and the S&P 500 (chart)Ā  tumbling down toward and below their 200-day moving averages. It really only took a day for this key support metric to kick in and demonstrate its technical support influence. Since this brief but noticeable selloff occurred, both indices have snapped back and we now find the S&P 500 (chart) within 10 points of its all-time high. Some pundits did indeed expect that Q2 earning reporting season could be the catalyst to lift the markets out of the fears of Greece and China. And seemingly their expectations have been met. That said, there are many more companies set to report their earnings results over the next couple of weeks, with all eyes now focusing on how Apple (NasdaqGS: AAPL) will fare as they are set to report their quarterly report next Tuesday July 21st after the close. As with most earnings reporting seasons over the past few years, stocks have overall fared well and this time it appears well enough to break key index records.

Good luck to all šŸ™‚

~George

Tough Day For Stocks…

Posted on by George Mahfouz

Stocks took it on the chin today with most of the major averages closing in the red. On the day, the Dow Jones Industrial Average (chart) closed down 279.47 points, the Nasdaq (chart) closed lower by 75.97Ā points, the S&P 500 (chart) closed the day off by 23.81Ā points and the small-cap Russell 2000 (chart) lost 21.04Ā points. FearsĀ from Asia to Europe are spilling over in to U.S. Equities. Securities regulators in China areĀ banning certain types of equities financing which will have an effect on margin trading. Furthermore, across the pond in Europe, investors are becoming more worried about Greece and whether or not that country will be able to make payments onĀ debts thatĀ are coming due and whether or not Greece will even stay in the eurozone.

Despite today’s selloff, Q1 earnings have not been too shabby so far, especially out of the banking sector.Ā Earlier this week, JP Morgan (NYSE: JPM) reported a $5.91 billion dollar profit or $1.45 per share surpassing most analysts expectations and Citigroup (NYSE: C) also exceeded analysts expectations by posting a $1.51 per share in earnings compared to the $1.39 per share the street expected. TheĀ stock that caught everyones attention this week was Netflix (NasdaqGS: NFLX). Netflix (chart) reported in their earnings release thatĀ almost 5 million subscribers came online compared to the 4 million analysts anticipated. This metric alone gave Netflix’s stock a boost of almost $90 dollar a share yesterday.

Fast forward to next week and we will get earnings results out of Morgan Stanley (NYSE: MS), Verizon (NYSE:V), United Technologies Corp (NYSE: UTX), Yahoo (NasdaqGS: YHOO), Boeing (NYSE: BA), eBay (NasdaqGS: EBAY), Facebook (NasdaqGS: FB), Qualcomm (NasdaqGS: QCOM), The Coca-Cola Co (NYSE: KO), Tractor Supply Co. (NasdaqGS: TSCO), 3M Co (NYSE: MMM), Amazon (NasdaqGS: AMZN), Eli Lilly & Co. (NYSE: LLY), General Motors (NYSE: GM), Google (NasdaqGS: GOOGL), Microsoft (NasdaqGS: MSFT), Newmont Mining (NYSE: NEM), Southwest Airlines (NYSE: LUV), Starbucks Corp (NasdaqGS: SBUX) and Biogen (NasdaqGS: BIIB) just to name a few. I think it’s safe to say we will get a very broad look as to how corporate America is faringĀ after all of these earnings results come forward.

Have a great weekend and good luck next week šŸ™‚

~George

Stocks Go On A Wild Ride!

Posted on by George Mahfouz

Stocks have been onĀ a torrid sell-off over the past week or so capitulating today with the Dow Jones Industrial Average (chart) dropping over 460 points intraday, then rebounding to close down 173.45 points. At least I think this could of been a capitulation day, maybe not? That said, this is the steepest intraday drop for the industrials in over three years. Same rings true for the Nasdaq (chart), this technology based index was down over 100 points intraday only to rebound closing down a modest 12 points. Also, the S&P 500 (chart) finished the day lower by 15 points and the small-cap Russell 2000Ā (chart) after being down sharply most of the day actually closed in the green by 10.85 points.

In my previous blog, I eluded to the fact that volatility is back and that Q3 earnings reporting was about to begin, so not only is volatility back, I believe it is here to stay for an extended period of time. And as far as earnings is concerned, now I am not so sure if this earnings reporting season will have a positive effect on the markets. Just take a look at bank stocks which began to report their results this week and even after their impressive quarterly results, their stocks got pulled down with the rest of the market.Ā What’s more, for companies that miss their numbersĀ in this type of environment, look out below. Perfect example here is Netflix (NasdaqGS: NFLX). After the bell, the company reportedĀ their quarterly results which missed analysts expectations and Netflix also guided lower for the upcoming quarter. The net result for their stock is a blood bath in after-hours trading. Netflix is down over $110 points, trading now in the $330 range. This is not a typo. It goes back to stocks that miss on their numbers or guide lower, these assets will be taken out to the woodshed first, and asked questions later. I believeĀ this is the environment we now find ourselves in.

It has been years since we have seen this type of market environment and I certainly will not forget the steep market sell-offs of the past. Furthermore, most every financial pundit out there has been calling for a market correction and now you have got it. So I would expect once the dust settles here we should find a base of support at some point and begin to see stabilization in the marketplace. However, and as I mentioned above, I do expect volatility to be back to normalized levels and be around for a while, so if you choose to take any new positions on, most likely they will go lower before they go higher, so a scale in and small incremental approach mightĀ be best. FinallyĀ and especially now, it’s usually a good idea to consult with a trusted certified financial planner(s) before composing any investment strategy. Good luck to all, and Paula and I wish everyone a safe and Happy Halloween šŸ™‚

~George

 

Record Close! Sure Doesn’t Feel Like It…

Posted on by George Mahfouz

The Dow Jones Industrial Average (chart) ended the month of April at a closing record finishing at 16,580.84. The Nasdaq (chart) closed the month out down 2%, the S&P 500 (chart) finished the month slightly up and the small-cap Russell 2000 (chart) lagged the markets closing down 4% at 1,126.85. Stocks have see-sawed all year long which is why for me, it does not feel like a record close. Another reason why we don’t feel like we are in record territory is we are seeing a lot of momentum stocks begin to lose their mojo, in particular Amazon (NasdaqGS: AMZN), Netflix (NasdaqGS: NFLX) and biotech momentum favorite Biogen Idec (NasdaqGS: BIIB) just to name a few.

That said, as Q1 earnings reporting season continues, companies continue to produce better than expected profits for the most part, which is one of the reasons why stocks have shown impressive resilience. The vitality of corporate America is quite remarkable considering the paltry 0.1% annualized growth rate our economy experienced in the first quarter. So now that we are in May, will the old adage “sell in May and go away” apply this year? I am not so sure. Let’s not forget interest rates remain near record lows, the Fed is still buying bond assets to help stimulate the economy albeit at a slower pace, and the technicals of the market are not in bad shape.

Let’s take a gander at the current technical setup of the aforementioned key indexes.Ā The two technical indicators I pay the closet attention to is theĀ Relative Strength IndexĀ a.k.a. theĀ RSI,Ā and theĀ moving averages. Out of hundreds of technical indicators available, I have found that these particular indicators work the best for me. In technical analysis, I like to keep things simple and not place too many indicators into the mix. It also helps that certain high profile market technicians, computerized trading models and certain institutional investors utilize the RSI and moving averages as their core technical indicators in their trading models. Ā Time and time again when I see that theĀ Relative Strength IndexĀ (RSI)Ā of a given index or equity is in an overbought or oversold condition, the majority of the time the asset or index reverts back to the mean. Typically the same rings true with theĀ moving averages, whenever a stock or index bumps up against or comes down to its moving average, typically the stock or index finds support or resistance. Letā€™s break this down in more detail. Pertaining to theĀ (RSI),Ā TheĀ RSIĀ is designed to demonstrate whether or not an index or stock is overbought or oversold, depending on certain value levels. According to theĀ RSIĀ principle, the 70 value level or greater, is an overbought condition and the 30 value and below is an oversold condition. As of right now, the aforementioned indices are hovering around the 50 value level +/- which is not indicating an extreme condition either way. Looking at theĀ moving averages,Ā of these four indexes, 2 of the 4 remain above their 50-day and 200-day moving averages and as you can see with the small-cap Russell 2000 (chart), this index has recently been finding support and bouncing off of its 200-day moving average,Ā which clearly demonstrates the powerful support that moving averages can provide.

So again, I am not so sure if the “sell in May and go away” will apply this year based on how the technical set-up appears, how corporate America is coming in with their surprising earnings report cards and a continuing accommodative Fed. Good luck to all and happy trading in the month of May šŸ™‚

~George