North Korea

Bellwether Indexes Surge To All Time Highs!

Posted on by George Mahfouz

Bellwether indexes surge to all time highs as the S&P 500 (chart) closed the month of August at 2901, the Nasdaq Composite (chart) closed at 8109, the small-cap Russell 2000 (chart) closed at 1740 and the Dow Jones Industrial Average (chart) is within striking distance of its all time high. I thought August is supposed to be a tough month for stocks? Not this year! New highs are happening while the political environment in our country is at a seemingly all-time low, the word impeachment surfaces daily now, tariffs are in the headlines daily, interest rates have been on the rise and now it seems that any type of progress made over the summer with North Korea may be in jeopardy. One would think that the aforementioned risks would be enough for an outright 10-20 percent market correction. Add in the seasonality factor and we should indeed be going red, not making all-time highs.

Now I am afraid to even mention that the month of September is historically the weakest month of the year for stocks right alongside with August. Do I dare say that September will be the month that our markets correct in a meaningful way? Do I have the courage to predict that this will be the month where the markets recognize and adjust for all of the risks that are present in our current environment? I don’t know people, I am as baffled as the next guy as to how these markets keep shrugging off real market issues. Oh by the way I forgot to mention we have mid-term elections forthcoming, the markets are not pricing in any risk there either. These markets are priced and acting like there is no absolute risks at all out there. Ok enough banter already!

How to play the markets now? I am a fan of the old adage “the trend is your friend” but folks I just can’t hop on this train at this point in time. I am heading to the sidelines until I see any type of technical breakdown to possibly consider implementing a short thesis or just wait for the inevitable pullback/sell-off to identify any potential long set-ups. Until then, Paula and I wish everyone a very safe and Happy Labor Day weekend 🙂

~George

2 Percent – That’s It?

Posted on by George Mahfouz

What should of been at least a 5-10% correction last week, the major averages barely flinched. This despite North Korea incessant threats of a nuclear attack against the U.S. and President Trump’s response that “fire and fury” will be unleashed by the U.S. in such an event. I am truly in disbelief that the markets did not take this geopolitical risk to correct in a more meaningful manner. In fact stocks yesterday had their best single day of the summer. Now we find ourselves yet again near all time highs. The Dow Jones Industrial Average (chart) closed just shy of 22,000, the S&P 500 (chart) is just under its all-time high of 2490, the Nasdaq (chart) closed at 6430 and the small-cap Russell 2000 (chart) closed Monday’s session at the 1395 level.

Talk about passive, machine driving algorithmic trading. One thing that really stands out to me is how the S&P 500 (chart), Nasdaq (chart) and the Russell 2000 (chart) all held their major moving average support lines. In particular the S&P and Nasdaq’s 50-day MA and take a look how powerful the Russell 2000’s 200-day moving average held and bounced (chart). It is clear that program trading models worked to perfection on this recent market pullback at least pertaining to key technical support levels.

So are we out of the woods pertaining to the risk trade? I am not so sure. But my goodness how can anyone have any kind of short thesis on these markets. Not even the heightened and continuing threat of a nuclear attack can rattle these markets more than 2 percent. Now that the rhetoric coming out of North Korea has abated for now, it could be business as usual as traders and investors get back to focusing on corporate earnings and fed policy. Whatever the case is I continue to be baffled by the strength of the U.S. stock market and without a doubt the old adage “don’t fight the tape” couldn’t be more true this year.

Good luck to all 🙂

~George

No Fear Here…

Posted on by George Mahfouz

Despite North Korea launching its seventh missile test of the year on Sunday and the White House seemingly in an upheaval, stocks continue to demonstrate no fear and continue their record setting ways. Today the S&P 500 (chart) and the Nasdaq (chart) hit all time highs. Without question this bull market is now even catching wall street veterans off guard. Q1 earnings reporting season is close to wrapping up and other than retail, most companies have reported in-line or outright beats in their earnings results, especially the tech sector. Tech has been on fire lately and this is due in large part of mega-cap tech smashing analysts expectations. Earnings results from companies such as Apple (NasdaqGS: AAPL), Amazon (NasdaqGS: AMZN), Alphabet (NasdaqGS: GOOGL) and Facebook (NasdaqGS: FB) has propelled the Nasdaq (chart) and these particular issues to all-time highs. The Dow Jones Industrial Average (chart) and the Russell 2000 (chart) remain in striking distance of setting new records as well. It is truly remarkable how the markets have been able to weather the current political environment here in the U.S. and the geopolitical risks abroad.

From a technical perspective, the aforementioned key indices are in pretty good shape. The Nasdaq (chart) is the only one of the four that remains in overbought territory according to the relative strength index. All of these averages also remain above their respective 50-day and 200-day moving averages, yet another bullish sign. Volatility also remains at historic lows. So one may ask what about the “sell in May and go away” adage? From a technical standpoint, I do not see any reason why these markets won’t continue to melt up from here. Of course there is always the risk of a geopolitical event or the actual seasonal risk of assets taking a pause or retracing a bit. That said and whatever the case may be, it is undeniable that the markets have been the most resilient in years, if ever.

Good luck to all 🙂

~George