S&P 500

Not Even The Dog Days Of Summer Can Slow Down This Bull!

Posted on by George Mahfouz

Stocks once again defied logic setting records in the month of August, which is typically a soft month for equities. For the month, the Dow Jones Industrial Average (chart) finished up 3.2%, the tech-heavy Nasdaq (chart) closed the month up 4.8%, the S&P 500 (chart) gained 3.8% and the small-cap Russell 2000 (chart) closed the month up 4.85%. Now granted these gains came on relatively low volume, but nonetheless a very impressive performance considering the macro environment we are in especially with the geopolitical concerns in the middle-east and Ukraine. I suppose the U.S. economic numbers that have come out recently is part of the reason why stocks continue to march north. Last Thursday the Commerce Department revised the second quarter U.S. gross domestic product (G.D.P.) number to 4.2% which is quite a healthy expansion of our economy and what’s more, the sources of growth were broad based.

Looking ahead to this month, when traders and investors come back from their summer vacations, they will see all time highs for the S&P 500 (chart), the Dow Jones Industrial Average (chart) and don’t look now, even the Nasdaq (chart) is slowly approaching the 5000 mark, a mark that has not been seen since the tech-bubble of 2000. If you have been bearish or short this market, I do not know what to say other than I feel your pain. We have not had a 10% correction in equities in years now and just the slightest of pullbacks have been met with incessant support. I do not know what is going to break this trend and you know what they say, “the trend is your friend”. Enough of that, seriously, I too have been expecting at least a 5-10% correction, which if you are bullish, you should welcome it. Not only would this be healthy for the markets, in my view it’s getting to the point to where it’s almost required. I am beginning to become a little concerned that should a “black-swan” event occur, and history says “they happen when you least expect it” we could see such a sharp correction, that could trigger margin selling, which would lead to more selling pressure etc., we have all seen this movie before. I am not saying that this will take place, but if it does, and we if don’t have healthy corrections along the way, which we haven’t, this could magnify matters and we would be having a much different discussion.

With all that said, I will continue to monitor the economic numbers this month as well as the technical make-up of the aforementioned indices. Technically speaking, we are now approaching overbought territory according to the relative strength index (RSI). Paula and I wish everyone a very safe and Happy Labor Day 🙂

~George

Is That It?

Posted on by George Mahfouz

After what appeared to be the beginning of a healthy correction in the early part of August, stocks held true to form and rallied back this week even as Ukrainian forces engaged and attacked a Russian armored convoy today. When news leaked about the attack, the markets did reverse their earlier gains and dropped meaningfully only to find support and rebound off sessions lows. The Nasdaq (chart) actually finished the day in the green. If you are long this market and are bullish for the remainder of the year, you have got to feel pretty good about how the markets have responded this week to a very unstable geopolitical global environment. For the week, the Dow Jones Industrial Average (chart) gained 0.66%, the Nasdaq (chart) finished the week up 2.15%, the S&P 500 (chart) +1.215% and the small-cap Russell 2000 (chart) closed the week up 0.91%.

Does this mean we are out of the woods yet? I am not so sure. One thing that I believe will continue is market volatility. There is headline risk and equities are certainly reacting to sudden headlines that come out of Ukraine as well as the middle east. The surprise I think is how resilient the U.S. stock market remains in the midst of the geopolitical risks that are upon us. However, this is the one thing that continues to concern me is the escalation of conflict in not just one region but now in two. One way to insure a portfolio is to buy some protection in the form of S&P 500 puts, and more specifically puts on one the most popular ETF that tracks the S&P 500, the SPDR S&P 500 (NYSE: SPY) (chart). So if you have a long portfolio in equities, by buying put protection with the SPY’s, it is like buying an insurance policy should the equity market experience a correction. Put options go up in value should the equity or index you buy puts in goes down in value. Options are not for everyone and it is usually wise to consult with a certified financial planner(s) before implementing any investment strategy, I am just illustrating one way to protect a long portfolio by way of insuring it to a certain degree.

As far as I am concerned, I will continue to monitor the technical conditions of the aforementioned indexes and look for any signs of overbought or oversold conditions to act upon. As of right now the key indices are not in either condition. Good luck to all 🙂

Have a great weekend.

~George

The Moment Of Truth May Be Upon Us…

Posted on by George Mahfouz

We may be entering a period of where good economic news may be bad for stocks? U.S. gross domestic product bounced back sharply at a seasonally adjusted annual rate of 4% in Q2, according to the Commerce departments G.D.P. report issued on Wednesday. This was surprisingly higher than the consensus forecasts of 3% growth for the second quarter. Now wait a minute, isn’t economic expansion good for stocks? Well not if the markets have relied on ultra low interest rates and assets purchases by the Fed as the cushion and floor to the stock market. Stocks had one of their worst performances of the year yesterday and for the month of July the Dow Jones Industrial Average (chart) lost 1.56%, the tech heavy Nasdaq (chart) gave back 0.87%, the S&P 500 (chart) -1.5% and the small-cap Russell 2000 (chart) closed the month of July lower by an eye-popping 6.1%. Now the question becomes is this the beginning of a longer term trend in the marketplace or just another buying opportunity? Personally, I am a bit concerned over the set-up of the markets in general and it’s no secret a correction in equities has been long overdue. Add to the mix that historically and seasonally, August through October hasn’t been a favorable time for stocks. So I think erring on the side of caution may be the wise thing to do.

Let’s take a look at the technical set-up of the aforementioned key indexes. The first thing I want to look at is whether or not the markets are overbought or oversold according to the RSI principle. The relative strength index a.k.a. the RSI, is a technical indicator that compares the size of moves of both recent gains and losses to determine overbought and oversold conditions. The 70 value level and higher and the 30 value and lower are considered extreme conditions. As of the close of trading yesterday, the Dow Jones Industrial Average (chart) RSI was at 32.09, the Nasdaq (chart) RSI was at the 44.24 value level, the S&P 500 (chart) RSI was at 35.85 and the small-cap Russell 2000 (chart) RSI was at 34.76. So as you can see these key indices are not yet in extreme oversold conditions. From a technical standpoint, my preference is to enter positions only when extreme conditions occur, that is when RSI levels are below 30 or above 70. Of course this position has to be supported by strong fundamentals as well. When you have both factors going for you, chances are the set-up would most likely provide favorable results.

Now another favorite technical indicator of mine are the moving averages. The 20-day, the 50-day and the 200-day are the most popular moving averages certain market technicians utilize. The moving average lines historically provide support and/or resistance depending on which side of the line the asset resides. As of the close of yesterday, the Dow Jones Industrial Average (chart) fell below its 50-day moving average for first time since mid-May, the Nasdaq (chart) fell below its 20-day, however, its still trading above its 50-day and may find some support there? Looking at the S&P 500 (chart), it too has fallen below its 50-day moving average and the small-cap Russell 2000 (chart) has now taken out its 200-day moving average and is technically the weakest index of the group.

So as you can see, the markets are not yet in extreme oversold conditions according the the RSI principle and the moving averages are currently being violated, which may indicate that the selling pressure may not be over. Of course this is only a technical recap of current market conditions which is only one component that can shape the markets. Please remember that it is best to always consider consulting with a certified financial planner(s) before making any adjustments to your portfolio or developing any investment or trading strategies .

Best of luck to all 🙂

~George

First Half Of The Year In The Books, And The Bull Keeps Running…

Posted on by George Mahfouz

After gaining 30% or so in 2013, the markets continue to be on one of the most impressive bull runs in modern history. Here is how the four key indices closed out the first half of 2014: The Dow Jones Industrial Average (chart) finished up 1.5%, the Nasdaq (chart) gained 5.5%, the S&P 500 (chart) advanced 6.1% and the small-cap Russell 2000 (chart) closed out the first half of 2014 up 2.6%. Looking back to the market lows of early 2009, these aforementioned indices have tripled or better in price, which is simply stunning.

I think now is as good a time than any to begin to take a look at how the major averages can continue to rise in spite of almost tripling over the past 5 1/2 years. What could be the catalyst(s) going forward? It’s no secret that the Federal Reserve is scaling back its asset purchases and are scheduled to be finished by year-end, so no surprise there. This in fact is where the bear camp is growling that the end of the Fed stimulus program could be the catalyst to end this historic bull run. What about corporate earnings? In my humble opinion, herein lies the single most important catalyst that will either add fuel to this incessant bull run or put the brakes on it. If it’s the latter, this could also create the first real correction in stocks, something that hasn’t occurred in years.

Investors will not have to wait too much longer for Q2 earnings reporting season is upon us. The first key earnings release that has economic implications will be Alcoa (NYSE: AA) which is due to report next Tuesday after the close. I will be very interested to see the top-line growth of Alcoa which will certainly shed some light as to the health of the global economy. Investors have been bidding up Alcoa most of the year in anticipation of an expanding global backdrop. Another economically sensitive stock at least as it pertains to the consumer is Family Dollar Stores (NSYE: FDO). Family Dollar is scheduled to report their quarterly results next Thursday before the market opens. Then by mid-July we will be in high gear to hear how corporate america fared in Q2. The week of July 14th, earnings are scheduled to come out of American Airlines (NYSE: AAL), American Express (NYSE: AXP), Blackrock ( NYSE: BLK), Citigroup (NYSE: C), Whirlpool Corp (NYSE: WHR), JPMorgan Chase (NYSE: JPM) Goldman Sachs (NYSE: GS), Johnson & Johnson (NYSE: JNJ), Intel (NasdaqGS: INTC), Yahoo (NasdaqGS: YHOO), Bank of America Corp (NYSE: BAC), Ebay (NasdaqGS: EBAY), U.S. Bancorp (NYSE: USB), Yum Brands (NYSE: YUM), Baker Hughes Inc (NYSE: BHI), UnitedHealth Group (NYSE: UNH),  Blackstone Group LP (NYSE: BX), International Business Machine (NYSE: IBM), Google (NasdaqGS: GOOGL), Bank of New York Mellon Corp (NYSE: BK) and General Electric (NYSE: GE) just to name a few. As you can see, I think it is safe to say that by the middle of July or so we will have a pretty good idea of how corporate America is faring.

Please note that in recognition of the 4th of July holiday, the markets will be closing at 1pm E.S.T. on Thursday and is closed on Friday the 4th. Both Paula and I wish everyone a very safe and happy 4th of July 🙂

~George

 

Overbought Conditions and Iraq Weigh In On Stocks…

Posted on by George Mahfouz

After the Dow Jones Industrial Average (chart) and the S&P 500 (chart) set all time highs last Monday, the conflict in Iraq and overbought conditions spun a modest pullback in the key indices. Although some are attributing the selling pressure to the unexpected defeat of the House majority leader Eric Cantor (R., VA).  For the week, the Dow Jones Industrial Average (chart) lost 148.54 points, the tech ladened Nasdaq (chart) -10.75 points, the S&P 500 (chart) -13.28 points and the small-cap Russell 2000 (chart) closed slightly lower on the week. What has been eye popping to me is how complacent and tranquill market participants have been. Over the past several months and especially the past couple weeks, investor sentiment has been extremely bullish which in turn has sent the VIX to multi-year lows. The VIX, also know as the fear gauge, is used as an indicator of investor sentiment. Recently the value of the VIX (chart) hit a trough low of 10.73, its lowest level since 2006. Out of all of the market events that are going on, this indicator has me concerned more than any other. As much as I have been bullish on the overall markets, when sentiment gets this comfortable and the VIX trades this low, historically markets set up for a pullback or even a correction of sorts.

This set-up is just what both the bears and the bulls have been waiting on. I personally have been tempted to short this market considering the historic record breaking run up stocks have had. But I have learned a long time ago is you don’t want to step in front of the Federal Reserve or a freight train either, which is what this market has been. So my preference is to be patient, wait for whatever pullback(s) or correction we may get, and then begin to scale in on certain long positions. I will refer to the technical set-ups of indexes and certain equities to assist me in establishing entry points. Click here to see what I look at pertaining to technical analysis. Now whether you are a technical trader or fundamental investor, the fact remains that markets remain awash with liquidity thanks to the Fed, and there really is no where else to get the alpha that hedge funds and institutional investor alike need for their performance mandates. So knowing that these institutions really dictate the ebbs and flows of the markets, my bets will continue to align with theirs and over the past few years whenever we do experience an increase in market volatility and market pullbacks, a buy signal usually ensues. Please remember it is always wise to at least consult with a certified and trusted financial advisor(s) before you compose any investment strategy or make any investment decisions. Good luck to all.

Happy Father’s Day 🙂

~George

Where are they now?

Posted on by George Mahfouz

Just a mere 2 weeks ago the pundits came out in full force declaring the end of the bull market or at the very least a 10-20% correction for stocks. Fast forward to today and we find ourselves yet again in record breaking territory. For the month of May, the Dow Jones Industrial Average (chart) closed up 0.82% at a new record closing high of 16,717.17, the Nasdaq (chart) closed the month up 3.11% at 4242.61, the S&P 500 (chart) closed at an all time record high of 1923.57 and the small-cap Russell 2000 (chart) closed out May up 0.68% at 1134.50.

In my previous blog I wrote about certain experts calling for an imminent correction in which I thought was a bit pre-mature considering how the Federal Reserve continues to accommodate the economy and the markets. I understand where the bear camp is coming from, as soon as the Fed begins to hike interest rates, we should indeed see the markets react accordingly. The problem with the sell-side thesis is this just isn’t happening now. Policymakers continue to reiterate their stance on interest rates which are to remain low for the foreseeable future as the bond tapering program continues and ultimately exhausts itself, which could be by year-end. Then I think bear growl may have a lot more punch to it.

So how do we continue to make money in an environment that continues to make record highs seemingly with no end in sight? In addition to honoring the power of the Fed, I will continue to refer to the technical shape of the key indices to spot opportunities as we wait for the second quarter to wind down. With the incessant “melt-up” of the markets, one may think that stocks maybe overbought a bit. This most certainly is the case with select individual stocks, however, as I look at the closely followed Dow (chart), Nasdaq (chart), S&P 500 (chart) and the Russell 2000 (chart), none of these indexes are in overbought territory at least according to their respective Relative Strength Indexes. Remember, the Relative Strength Index (RSI) is a technical indicator which signifies whether or not a stock or index is overbought or oversold, with the 70 plus value level indicating an overbought condition, and the 30 minus level indicating an oversold condition. Click here for the expanded definition of the RSI. In addition, all of the moving averages are intact for the aforementioned indexes. Click here for the moving averages definition.

So as we enter the month of June, I am expecting the continuation of the “melt up” that has occurred so far this year with modest pullbacks. Of course as we witnessed in mid-May, sentiment can change quickly and the pundits and press for that matter can spread fear like wild fire, and should this be the case, I will prepare myself to add to certain long positions to take advantage of any potential weakness. As always, it is best practice to consult with a trusted financial advisor(s) before making any investment decisions. Good luck to all 🙂

~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. The two technical indicators I pay the closet attention to is the Relative Strength Index a.k.a. the RSI, and the 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.  Time and time again when I see that the Relative Strength Index (RSI) 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 the 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. Let’s break this down in more detail. Pertaining to the (RSI), The RSI is designed to demonstrate whether or not an index or stock is overbought or oversold, depending on certain value levels. According to the RSI 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 the moving averages, 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, 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 🙂

~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

 

A Ho Hum Q1…

Posted on by George Mahfouz

It doesn’t seem like it, but for the first quarter of the year the four major averages were essentially flat. For the quarter, the Dow Jones Industrial Average (chart) closed basically unchanged, the tech heavy Nasdaq (chart) finished up just over 1% percent, the S&P 500 (chart) +2.2% and the small-cap Russell 2000 (chart) closed out Q1 slightly up. Quite an uneventful quarter at least from a P&L standpoint especially considering China’s economic slow down and the Ukraine crisis that unfolded in the quarter. There was a period in late January in which we saw a sharp 5% decline only to be met with unconditional support, followed by a rally which led the markets back to almost unchanged on the year.

As I always do at the end of each quarter, I look at the technical conditions of the aforementioned indexes and how they are shaping up going into a new quarter. There are plenty of market technicians out there that use a variety of techniques and indicators to identify trends and where the markets may be headed. My preference is to keep things as simple as possible when conducting technical analysis. As you may know by now, two of my favorite technical indicators are the  Relative Strength Index also know as the RSI and the moving averages. Part of the reason why I prefer these two reliable indicators over most is it is now seemingly more than ever computerized trading models are emphasizing the RSI and the 20-day, 50-day, 100 and 200-day moving averages in their models. These indicators also have been a long time favorite of institutional investors. So it’s no wonder that when the Relative Strength Index (RSI) is indicating an overbought or oversold condition in an index or equity, more times than not, the asset finds support and changes direction. The same can be said for the 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.

Let’s break this down in more detail starting with the (RSI), The RSI is designed to demonstrate whether or not an index or equity is overbought or oversold, depending on certain value levels. According to the RSI principle, the 70 value level or greater, is an overbought condition and the 30 value and below is an oversold condition. Looking at the aforementioned indices now, there is no indication of an overbought or over sold condition. However, both the Nasdaq (chart) and the small-cap Russell 2000 (chart) are trading and have closed below their 50-day moving averages. These two indices have been leading the markets higher and now comparatively speaking, they have begun to lag, a potential short term ominous sign. Now it has only been a couple of days that both of these indexes have been trading below this support line so we will have to wait and see if this turns into a longer term trend.

That said, we will not have to wait much longer. This Friday’s jobs report will shed light as to the health of the labor market and don’t look now but Q1 earnings reporting season is on deck. Without a doubt, Q1 earnings reporting season will be placed under a microscope to see if corporate America and the markets deserve their current valuations. Personally, I think a rather healthy pullback may be in the cards for equities and if so, most likely, the trend of unconditional support will come back into the markets as well.

Good luck to all. 🙂

~George

Global Concerns Give Markets A Pause…

Posted on by George Mahfouz

Stocks had a very volatile week as tensions elevated in Ukraine and now China has seemingly hit a soft patch in its economy. For the week, the Dow Jones Industrial Average (chart) fell 2..35%, the Nasdaq (chart) gave back 2.09%, the S&P 500 (chart) -1.96% and the small-cap Russell 2000 (chart) ended the week lower by 1.82%. I do not think the most recent retreat in stocks is anything beyond the current global headline risks as our own economy appears to be intact and growing, albeit modestly. Some economists believe China will maintain a 7.5% growth rate this year while other pundits believe a cooling off of China’s economy would affect our markets here. Should the latter be the case, I would assume the Chinese government would take measures to help prop up their economy by injecting enough stimulus to ensure the targeted 7.5% growth rate for 2014 would not be breached. Recently, the economic numbers across the board coming out of China has been weaker than expected, especially in the manufacturing and export sectors.

This past week also saw an escalation in the crisis in Ukraine with both sides increasing the chatter about a potential military conflict as protests have become extremely violent. Governments from around the world are now are attempting to assist in the negotiations with Russia and Ukraine to formalize some type of accord. So it’s no surprise that a “risk off” mentality has come into the markets for the time being. I do believe that once things settle down in the Ukraine and the China headlines become less frequent, we could consolidate here for a bit as the first quarter of the year winds down. Then of course as we enter into April, all eyes will be watching how corporate America fared during the first quarter as Q1 earnings reporting season will begin. Between now and the end of March, I will be paying closer attention to our own economic data which will most likely translate into companies Q1 earnings reports.

Technically speaking, the Dow Jones Industrial Average (chart), the Nasdaq (chart), the S&P 500 (chart) and the Russell 2000 (chart) all appear to be heading towards their respective 50-day moving averages, in fact the Dow (chart)  actually breached its 50-day on Friday. The 50-day moving average is a technical indicator I favor as do other certain market technicians. Historically, when stocks or indexes reach their 50-day or 200-day moving average for that matter, support is typically found and a reversal of the stock or index ensues. The moving averages are also followed by certain institutional investors and select computerized algorithmic trading models, which could also be a reason why the moving averages can act as a support mechanism. Now I am not suggesting that the moving averages are infallible, I personally utilize this indicator mainly from a technical standpoint to help me navigate current market opportunities. Good luck to all.

Have a great weekend 🙂

~George