Upward Trend Remains Intact!

Record highs continue as the upward trend in the stock market remains intact! Despite the impeachment proceedings now going public and despite the China trade deal seemingly pausing we are still setting records. The Dow Jones Industrial Average (see chart here), the S&P 500 (see chart here) and the Nasdaq Composite (see chart here) all hit record highs this week. The small-cap Russell 2000 (see chart below) is holding its own in the overall upward trend, however, this index remains below its all-time high by 150 points or so.

The good news today coming out of the White House is that we are getting closer to a deal with China. This news was enough to send the Dow Jones Industrial Average (chart), the S&P 500 (chart) and the Nasdaq Composite (chart) to all time highs yet again. It is incredible that just a blurb out of the White House regarding a potential deal sends stocks rip roaring ahead. One of the concerns I have about actually seeing a deal get done by year-end is that next week it is possible a tweet from our President may read the exact opposite. If you look back and think about it how many times have we seen a tweet or an announcement that a deal is getting closer only to have the next statement speak to the exactย  opposite. Hopefully today’s announcement (click here) sticks and that we actually see a trade deal get done by year-end. No more talk!

If indeed a trade deal gets done there no question this will be good for business here in the U.S. Although it may feel that stocks and the key indexes are overbought, if a deal gets done then it is very possible that we continue to notch records between now and year-end.

Good luck to all ๐Ÿ™‚

~George

The Uptrend Remains Intact - George Mahfouz

One Hot June!

One hot June indeed and I do not mean the weather folks! Stocks and commodities went on a tear in the month of June logging the best June in decades for some of the indexes and other asset classes. The Dow Jones Industrial Average (see chart here) soared over seven percent last month. The S&P 500 (see chart below) hit an all time high in the month of June while both the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) notched impressive gains as well. What’s more is both oil and gold surged right along side of the key indexes.

So why the rally? I think the answer is simply an easier monetary posture by the Federal Reserve. It is no secret that inflation is well in check and it is also becoming apparent that the U.S. job market is cooling off. Another factor for the Fed to consider is what impact would a full blown trade war with China do to the U.S. economy? This is why in my opinion we are seeing a continuing upward trend in our markets and that is a dovish Fed is usually very good for stocks. One other factor that will certainly weigh in is the upcoming earnings reporting season. Now that the second quarter of the year is in the books we will see how well corporate America did in Q2 as earnings reporting season gets underway this month. I will continue to look to monitor how “top-line” growth is faring.

Let’s take a quick look at the technical shape of the key indexes. After surging over 7% in June, the Dow Jones Industrial Average (see chart here) remains clearly above its 20-day, 100-day and 200-day moving averages as does the S&P 500 (see chart here). The Nasdaq Composite (see chart here) is in a healthy technical condition and last but not least, the small-cap Russell 2000 (see chart here) has broken above its key moving averages. This is a very good sign for stocks and furthermore none of indices are in overbought territory according to the principles of the RSI also known as the relative strength index.

Both Paula and I wish everyone a very safe and Happy 4th of July holiday ๐Ÿ™‚

~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 ๐Ÿ™‚

~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.ย  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 ๐Ÿ™‚

~George

Nasdaq Composite - Paula Mahfouz

Earnings And The Fed!

Stocks took off this week and we can blame earnings and the Fed! Now that we are fully into earnings reporting season the investors so far have liked what they see. Couple that with the Federal Reserve coming out on Wednesday stating that the central bank is “changing its tune” on interest rates, and you have a one-two bull market punch. Also on Wednesday, Fed Chairman Powell stated “the case for raising rates has weakened somewhat” and that the Federal Reserve will be more patient toward further rate hikes. Stocks rallied hard on the Fed’s new position along with stronger than expected earnings reports that are coming in from corporate America. For the month of January, The Dow Jones Industrial Average (see chart here) is up over 2000 points, the S&P 500 (see chart below) is also up over 200 points, the Nasdaq Composite (see chart here) is up 800 points and the small-cap Russell 2000 (see chart here) closed out the month of January up 175 points. January 2019 has been one of the best performing months in years.

Let’s take a look at the technical shape of the markets from a moving averages perspective. The Dow Jones Industrial Average (chart) has just broken through its 200-day moving average, while the S&P 500 (chart) and the Nasdaq Composite (chart) are both sitting on its 100-day moving average and the small-cap Russell 2000 (chart)is not too far behind. There are still plenty of earnings reports that will be released over the next few weeks and to me this is the remaining catalyst that could drive stocks higher here in the short term. Let’s keep in mind there are still other catalysts on the horizon that could put the brakes on this most recent rally with the government having yet another deadline to reach a deal on border security and of course the looming tariff deal with China. If one or both of these deals do not get done, I think we will be having a different conversation in March. Until then, let’s enjoy the current wave of positive news and market action and then see what kind of adjustments that would possibly need to be made. Good luck to all ๐Ÿ™‚

~George

S & P 500 - Paula Mahfouz

 

Happy New Year!

Happy New Year! Well if you have been long the markets and with the way stocks closed out 2018, it wasn’t so happy for the bull camp. However, a new year means new beginnings :-). Let’s do take a gander to see how the major averages fared in 2018. The Dow Jones Industrial Average ( click here or see chart below) finished the year down 5.6%, the S&P 500 (chart) closed the year down 6.2%, the Nasdaq Composite (chart) closed down 4% and the small-cap Russell 2000 (chart) closed 2018 down 12%. This is the worst performing year for stocks in a decade.

So what happened? In my view and simply put how can stocks go up in a straight line for over a decade without a correction? That’s right, stocks essentially have gone up for over 10 years’ without a healthy 20% correction. So when the markets finally had a real correction which is what occurred in the 4th quarter, it felt like the sky was falling. No question the Federal Reserve and rising interest rates have played a role in the market correction, however, let’s keep this in mind a 2-2.5% Fed funds rate is still historically low. What wasn’t normal over the past decade was a 0 percent interest rate policy and no market volatility. Everyone got spoiled with such an accommodative policy and market environment.

Another factor playing into the mix of the Q4 market correction is without question the trade war and tariffs that our President has ignited. This to me is even more of an issue to our economy than rising interest rates lifting to a normalized level. Not only is the trade war and its ramifications playing a role, but the inconsistency and chaos out of Washington are wreaking havoc on the markets.ย  No doubt in my mind that investors and Wall street are falling out of love with how our country is being governed, especially over Twitter. This is all fixable, we will just have to wait and see if the ego’s and the political agendas on both sides of the aisle can get the confidence back in our marketplace. Paula and I wish everyone the happiest and most prosperous 2019.ย  Good luck to all ๐Ÿ™‚

~George

Dow Jones Industrial Average - George Mahfouz Jr

A Market Selloff That Just Did Not Happen…

As summer ended where was the market selloff? Instead of conforming to what historically are the weaker months of the year whereas stocks at the very least should of paused with lighter volumes, the major averages hit all time highs. The Dow Jones Industrial Average (chart), the S&P 500 (chart), the Nasdaq Composite (chart), the small-cap Russell 2000 (chart) and even the Dow Jones Transportation Averageย (see chart below) all hit record highs in the third quarter. In fact the broad based S&P 500 (chart) turned in its best quarterly performance in five years. In my previous blog, I spoke to how traders and investors alike are awaiting a September selloff but seemingly nothing can stop this perma-bull market! Not trade wars, not interest rates, not the threat of inflation, not the daily chaos out of Washington, not historic seasonality, I mean nothing has stopped this bull market. Without a doubt this has been a close your eyes and a “go long” market. If you just did that over the past decade, you would of been part of 100% plus gains and whoever did do that, congratulations!

So now begs the question of what now? What now is fourth quarter earnings reporting season and oh yes the mid-term elections! October will not only be loaded with corporate earnings reports but there is also this little event call mid-term elections. I think it is safe to say that at the very least volatility shouldย  rear its head up. As the summer trading months were unfolding vol went back to its “low vol” standard as we have witnessed for past decade. There is just no fear in the markets. The volatility index aka the VIX (chart) is a measure of investor fear and in this case, lack thereof. I have got to believe that volatility will increase as we head into earnings reporting season and especially as we approach mid-term elections. Good luck to all! ๐Ÿ™‚

~George

Dow Jones Transports - George Mahfouz Jr

Bellwether Indexes Surge To All Time Highs!

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 ๐Ÿ™‚

~George

The Economy Is Booming, But…

There is no question the economy is booming but what does this mean long term for stocks? When the economy is firing on all cylinders like it is now here in the United States one may think the stock market must be ready for its next leg up! Not so fast. Historically when the economy heats up and the unemployment rate becomes so low, that does not typically bode well for stocks. Why you ask? Simply put, the Federal Reserve does not want inflation to rear its head up and their main tool to avert inflationary pressures is to raise interest rates. As counterintuitive as it may seem, a strong economy and low unemployment may be the catalyst to put the brakes on this almost 10 year bull market run. That said, the major averages continue to show extraordinary resilience no matter what comes at it. The Dow Jones Industrial Average (chart) closed the week above 25,000, the S&P 500 (chart) finished the week at 2779, the Nasdaq Composite (chart), finished near its all time high and the small-cap Russell 2000 (see chart below) closed the week out a few points away from it’s all time high as well.

It is quite remarkable how the aforementioned indexes are behaving with all things considered. This past week the Federal Reserve raised interest rates again and signaled two more hikes this year and the trade war chatter and action with China and our own allies for that matter is accelerating. Just these two events alone show be putting selling pressure on stocks not setting new record highs as is the case this past week with the Nasdaq Composite (chart) and the Russell 2000 (chart). These indexes also remain well above key moving averages which at some point in time reversion to the mean should occur. I will be looking for opportunities on the short side but will continue to respect the fact that this years-long bull market remains intact at least from a technical standpoint. Good luck to all ๐Ÿ™‚

~George

george mahfouz jr - Russell 2000

 

Risks Abound!

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 ๐Ÿ™‚

~George

Dow Jones - George Mahfouz Jr