27-Week Rally Continues!

Monday, February 28, 2011
Stock Market Commentary:
Stocks rallied on Monday after finding support near their respective 50 DMA lines last week. The current crisis in the Middle East remains in flux which is putting upward pressure on gold and oil. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages bounced after finding support near their respective 50 DMA lines in late February.

Consumer Spending, Personal Income Rise; Pending Home Sales Fall:

Consumer spending in the U.S. rose but fell short of estimates last month due to higher food and energy prices. The Commerce Department said purchases rose +0.2% which was the smallest gain since June and half the median forecast. The report also showed that personal income topped estimates which was largely due to a stronger economy and the recent tax-cut extension. Inflation remained at bay and below the Federal Reserve’s 2% target. Elsewhere, a separate report showed U.S. pending home sales fall -2.8% in January to 88.9. The pending home sales index fell -1.5% compared to the same level last year.

Market Action- Rally Under Pressure; Week 27 Begins

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November, January, and late February. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks were a bit extended in recent months and this pullback (back to the 50 DMA lines) is very healthy as it shakes out the weaker hands and restores the the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

 

50 DMA Line Is Support

Friday, February 25, 2011
Stock Market Commentary:
Stocks ended the week lower as geopolitical woes continued in the Middle East and both oil and gold enjoyed healthy gains over the past few weeks and months. The current crisis in Libya remains in flux which is putting upward pressure on gold and oil and downward pressure on equities. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages pull back towards their respective 50 DMA lines to consolidate their recent gain.

Monday-Wednesday’s Action:

Stocks were closed in the U.S. on Monday in observance of President’s Day. Overseas, stocks fell as thousands of Libyan’s protested Muammar al-Gaddafi’s 40+ year reign. On Tuesday, stocks were smacked as oil prices rose and economic data was mixed. On the economic front, U.S. confidence rose in February to the highest level in three years as the global economy continues to recover. The S&P Case-Shiller index showed home prices fell -0.4% on an adjusted month-to-month basis.
Stocks slid on Wednesday as WTI crude oil surged above resistance of its latest base and briefly hit $100/barrel. Elsewhere, the National Association of Realtors said existing home sales rose by +2.7% to a 5.36 million annual rate, exceeding the 5.22 million median forecast last month. However, the report showed that the median home price fell to the lowest level in almost nine years as the number of “distressed sales” (i.e. foreclosures and other distressed properties) soared to a 12-month high.

Thursday & Friday’s Action: Jobless Claims, Durable Goods, New Home Sales, & GDP:

Stocks ended mixed on Thursday after the Labor Department said weekly jobless claims fell by -22,000 to a seasonally adjusted 391,000 last week. The drop was seen as a net positive for the economy and the ailing jobs market. Durable goods orders topped estimates which also bodes well for the economic recovery. However, new home sales missed estimates which suggests the sluggish housing market has yet to recover. New home sales tanked -12.6% to a lower-than-expected annual rate of 284,000 units. Before Friday’s open, the government said GDP was revised down to +2.8%, lower than the 3.3% forecast. However, stocks shrugged off the news as geopolitical woes eased a bit in the Middle East.
Market Action- Rally Under Pressure; Week 26 Ends
It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines recently which is a healthy sign. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks were a bit extended in recent months and this pullback (back to the 50 DMA lines) is very healthy as it shakes out the weaker hands and restores the the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

Stocks End Mixed

Thursday, February 24, 2011
Stock Market Commentary:
Stocks ended mixed on Thursday as geopolitical woes continued in the Middle East and both oil and gold negatively reversed (on a daily basis) after a large run. The current crisis in Libya remains in flux which is putting upward pressure on gold and oil and downward pressure on equities. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages pull back towards their respective 50 DMA lines to consolidate their recent move.

Jobless Claims, Durable Goods, & New Home Sales:

The Labor Department said weekly jobless claims fell by -22,000 to a seasonally adjusted 391,000 last week. The drop was seen as a net positive for the economy and the ailing jobs market. Durable goods orders topped estimates which also bodes well for the economic recovery. However, new home sales missed estimates which suggests the sluggish housing market has yet to recover. New home sales tanked -12.6% to a lower-than-expected annual rate of 284,000 units. Regional data was mixed but the South, where unit sales exceed all other regions combined, shows a -12.8% decline. The government is slated to release the latest reading on Q4 GDP before Friday’s open.
Market Action- Rally Under Pressure; Week 26
It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines recently which is a healthy sign. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

Nicolas Darvas: Lessons From A Trading Legend

Introduction:
Every so often we like to re-read “classic investingbooks. This week we will discuss several of the invaluable lessons found in “How I Made Two Million Dollars in TheStock Market” by Nicolas Darvas. This is an excellent story about how the market “really works” and illustrates how Darvas evolved as a trader. He began, like most people, with no idea on how the market functions. After several successive failures he went through a severe period of introspection and began “learning” how the market worked.

Lesson 1: Focus On Strong Fundamentals
His first major realization was that he had to narrow down the list of stocks he was involved with. He did this by focusing on the company’s fundamentals and the stock’s technicals. He quickly realized that companies that exhibited strong fundamentals (impressive earnings and sales growth) enjoyed solid stock price appreciation. However, he soon realized that this was one “half” of the equation.
Lesson 2: Strong Technicals Matter
This lead him to his next realization, which later became known as, “Darvas Boxes,” occurred when he realized the importance of buying strength and began understanding how stocks move (i.e. rally, consolidate, rally, top out, and then fall). Each consolidation became known as “boxes.” Darvas developed/refined his “rules” through post analysis while he was working overseas (with very limited connection to Wall Street). The only access he had to Wall Street were overnight cables from his broker(s) and a weekly edition of Barron’s. His daily cables helped him keep track of his individual holdings and his weekly edition of Barron’s helped him isolate stocks that exhibited strong price and volume action.
Lesson 3: Follow Rules
Even after his two year dancing contract had expired Darvas, decided to continue this “distant” relationship with Wall Street. This kept him separated from the “crowd” andthe various rumors which constantly plague the Street. Bysimply following the stocks price and volume action, Darvaswas able to create/refine a trading methodology which hasshaped the thinking/writing for investors until present day.Like many things in life there is more than one wayto invest.
Lesson 4: Be Flexible
Some of our closest friends and readers are“pure” fundamentalists. We can talk for endless hours (perhaps weeks) with little avail to convince them otherwise. We also have friends/readers that invest strictly on the underlying technicals and the same is true for them. Here, at Sarhan Capital, we infuse the most pertinent fundamental and technical analysis and have realized that this formula best matches our personality/trading habits. Asking which is “correct” or “incorrect” is a futile exercise since there are an infinite amount of “correct” and “incorrect” ways to invest and trade capital markets. The key is find the “best strategy” that fits your personality and trading habits and make it work for you.

Contact Us:
If you want to learn more about Nicolas Darvas or want objective feedback on your investment strategy!

Bonus:

Stocks Continue To Slide

Wednesday, February 23, 2011
Stock Market Commentary:
Stocks were quiet on Wednesday as geopolitical woes continued in the Middle East. The current crisis in Libya remains in flux which is putting upward pressure on oil prices. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages pull back towards their respective 50 DMA lines to consolidate their recent move.

Existing Home Sales Surge

The National Association of Realtors said existing home sales rose by +2.7% to a 5.36 million annual rate, exceeding the 5.22 million median forecast last month. However, the report showed that the median home price fell to the lowest level in almost nine years as the number of “distressed sales” (i.e. foreclosures and other distressed properties) soared to a 12-month high.  Existing home sales rose to the highest level in eight months which bodes well for the ailing housing market. Elsewhere, oil prices rallied which serves as an indirect tax on the economy. At this stage, the major averages (and a slew of leading stocks) continue to pullback as they retest their respective 50 DMA lines.
Market Action- Rally Under Pressure; Week 26
It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

Stocks Slide on On Libya Woes

Tuesday, February 22, 2011
Stock Market Commentary:

Stocks fell on Tuesday as geopolitical woes continued in the Middle East. The current crisis in Libya intensified over the weekend. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages pull back towards their respective 50 DMA lines.

Libyan Woes Hurt Stocks

Stocks were closed in the U.S. on Monday in observance of President’s Day. Overseas, stocks fell as thousands of Libyan’s protested Muammar al-Gaddafi’s 40+ year reign. On Tuesday, stocks opened lower but stabilized as the day progressed. On the economic front, U.S. confidence rose in February to the highest level in three years as the global economy continues to recover. Elsewhere, the S&P Case-Shiller index showed home prices fell -0.4% on an adjusted month-to-month basis.

Market Action- Confirmed Rally; Week 26

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

Another Strong Week On Wall Street

Friday, February 18, 2011
Stock Market Commentary:
Stocks were quiet on Thursday after jobless claims rose more than expected last week and the consumer price index (CPI), which is used to measure inflation, continued to rise last month. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages continue marching higher. The fact that the major averages bounced back sharply after a very brief pullback in January illustrates how strong this 25-week rally actually is.

Monday-Wednesday’s Action:

Stocks were relatively quiet on Valetine’s Day after China said its exports surged last month.  China said that exports vaulted +37.7% – more than double December’s rate  – to $150.7 billion. Stronger Chinese exports suggests consumer demand is rising as well. In the U.S., President Barack Obama proposed a budget that would cut the deficit by $1.1 trillion over the next 10 years. The White House said a$3.729 trillion budget in which the deficit rose to $1.645 trillion in fiscal 2011, then will fall sharply to$1.101 trillion in 2012.
The major averages slid on Tuesday after retail sales and U.S. homebuilder confidence missed estimates. After Tuesday’s close, Dell (DELL), the world’s second largest computer manufacturer said earnings and revenue easily topped estimates. This set the stage for a healthy rally on Wednesday. The news on the M&A front was also healthy as Sanofi-Aventis (SASY.PA) said it plans to acquire Genzyme (GENZ) for $20.1 billion in cash and activist investor Nelson Peltz’s Trian Group offered to acquire Family Dollar Stores Inc (FDO) for $55 to $60 per share in cash or $7.6billion.
Housing construction was mixed last month and remained at a very weak levels. Starts advanced while permits fell back. Elsewhere, the producer price index (PPI) rose which suggests inflation is accelerating. The headline number rose +0.8%, matching the median forecast. Core prices, which strip out food and energy, rose+0.5% which topped the Street’s estimate for a +0.2% gain. If inflation continues to accelerate, the Fed will have more pressure to raise rates sooner than expected. A separate report showed industrial production falling to 5.2% from 6.3% in December. At 2pm EST, the FOMC released the minutes of its latest meeting which largely reiterated their recent support for QE II.

Thursday & Friday: Stocks Edge Higher On Stronger Economic & Earnings Data

Before Thursday’s open, the Labor Department said initial jobless claims rose by 25,000 to410,000 last week which topped the Street’s estimate for a gain of 17,000. The Labor Department also released the seasonally adjusted consumer price index which rose by +0.4% last month from December. On a year-over-year basis, prices swelled 1.6% before seasonal adjustments compared to the same period in 2010. However, core inflation, which removes food and energy prices and is considered the Fed’s preferred measure of inflation, increased by +0.2%. The report also showed that the annual underlying inflation rate stood at 1.0% in January which is still under the Fed’s target for 2.0%. At 10AM EST, leading economic indicators showed the economy continued to grow and the Philly Fed survey surged to 35.9, easily topping expectations. Stocks were relatively quiet on Friday as investors digested the week’s impressive move.

Market Action- Confirmed Rally; Week 25 Ends

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

Quiet Day On Wall Street

Thursday, February 17, 2011
Stock Market Commentary:
Stocks were quiet on Thursday after jobless claims rose more than expected last week and the consumer price index (CPI), which is used to measure inflation, continued to rise last month. The benchmark S&P 500 is up 100% from its March 2009 low, and still about -14% off its all time high from October 2007. On average, market internals remain healthy as the major averages continue marching higher. The fact that the major averages bounced back sharply after a very brief pullback in January illustrates how strong this 25-week rally actually is.

Jobless Claims, Inflation, Leading Indicators, & Philly Fed Survey Are Released:

Before Wednesday’s open, the Labor Department said initial jobless claims rose by 25,000 to 410,000 last week which topped the Street’s estimate for a gain of 17,000. The Labor Department also released the seasonally adjusted consumer price index which rose by +0.4% last month from December. On a year-over-year basis, prices swelled 1.6% before seasonal adjustments compared to the same period in 2010. However, core inflation, which removes food and energy prices and is considered the Fed’s preferred measure of inflation, increased by +0.2%. The report also showed that the annual underlying inflation rate stood at 1.0% in January which is still under the Fed’s target for 2.0%. At 10AM EST, leading economic indicators showed the economy continued to grow and the Philly Fed survey surged to 35.9, easily topping expectations.

Market Action- Confirmed Rally; Week 25

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

S&P 500 Up 100% From March 2009 Low!

Wednesday, February 16, 2011
Stock Market Commentary:
Stocks rallied on Wednesday after the latest round of economic, earnings, & M&A news were released. The benchmark S&P 500 is up 100% from its March 2009 low! The benchmark S&P 500 is up 100% from its March 2009 low! On average, market internals remain healthy as the major averages continue marching higher. The fact that the major averages bounced back sharply after a very brief pullback in January illustrates how strong this 25-week rally actually is.

Housing Starts, PPI, and Industrial Production:

After Tuesday’s close, Dell (DELL), the world’s second largest computer manufacturer said earnings and revenue easily topped estimates. This set the stage for a healthy rally in a slew of tech stocks. The news on the M&A front was also healthy as Sanofi-Aventis (SASY.PA) said it plans to acquire Genzyme (GENZ) for $20.1 billion in cash and activist investor Nelson Peltz’s Trian Group offered to acquire Family Dollar Stores Inc (FDO) for $55 to $60 per share in cash or $7.6 billion.
Housing construction was mixed last month and remained at a very weak levels. Starts advanced while permits fell back. Housing starts rose +14.6% after falling -5.1% in December. Elsewhere, the producer price index (PPI) rose which suggests inflation is accelerating. The headline number rose +0.8%, matching the median forecast. Core prices, which strip out food and energy, rose +0.5% which topped the Street’s estimate for a +0.2% gain. If inflation continues to accelerate, the Fed will have more pressure to raise rates sooner than expected. A separate report showed industrial production falling to 5.2% from 6.3% in December. At 2pm EST, the FOMC released the minutes of its latest meeting which largely reiterated their recent support for QE II.

Market Action- Confirmed Rally; Week 25 Begins

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November as this market proves resilient and simply refuses to go down. From our point of view, the market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

Are You Looking For Someone To Manage Your Money?
Our Private Wealth Management Services Can Help You!

Reuters Quote: COMMODITIES-Down after early gains; Mideast, inflation on radar

Tuesday February 15, 2011 05:39:20 PM GMT
Reuters News
MARKETS-COMMODITIES (UPDATE 2)
* Markets reverse gains after sell-off in copper, wheat
* Mideast, inflation still bullish for commods near term
* Coming up: US inflation/housing starts data on Wednesday
(Recasts and updates throughout after reversal in market gains; adds closing prices table)
By Barani Krishnan
NEW YORK, Feb 15 (Reuters) – Heavy profit-taking in grains and metals wiped out early gains in commodities on Tuesday, but inflation worries and tensions in Middle East oil producing nations could reverse the trend quickly, analysts said.
“If you’re an investor and looking to position yourself in this environment, you’ll go long commodities,” said Adam Sarhan at Sarhan Capital in New York. “We are starting to see higher inflation that’s going to reflect itself in higher oil prices and higher commodity prices everywhere.”
Investors are expected to look out for U.S. inflation and housing data on Wednesday to determine how price pressures are contrasting with recovery in the world’s largest economy.
In China, inflation hit a lower-than-forecast 4.9 percent in January, but price pressures excluding food were at their strongest in at least a decade.
Unrest in the Middle East and potential for supply disruptions in oil are also being closely watched.
Police and protesters clashed in Bahrain in follow-through to the protests in the region that have brought down the Tunisian and Egyptian governments.
In Iran, lawmakers urged death penalties for opposition leaders after a rally by thousands of opposition activists. In Yemen, hundreds of demonstrators and government loyalists fought in the capital.
“We are seeing contagion from Tunisia and Egypt to other countries that are more important for the oil markets,” said Christophe Barret, oil analyst at Credit Agricole Corporate and Investment Bank.
U.S. crude oil finished down half a percent at $84.32 per barrel, after rising to almost $86 earlier. London’s Brent crude settled down 1.4 percent at $101.64 per barrel, after touching a session high above $104.
The Reuters-Jefferies CRB index, a global benchmark for commodities, settled down 0.7 percent for its largest one-day loss in nearly two weeks. The 19-commodity index had begun the day strongly after tracking the initial rise in oil prices.
Wheat closed down almost 4 percent at $8.40-1/4 a bushel in Chicago, retreating sharply from last week’s 2-1/2 year high above $8.93.
Chicago soybean futures fell 2.5 percent on cancelled export orders. Corn finished 1 percent down.
The sell-off in grains came after major wheat grower Australia issued a surprisingly high forecast for wheat exports this year despite excessive rains that were expected to quality.
Analysts said the U.S. Department of Agriculture’s acreage forecasts from Monday, while preliminary, also led to a wave of fund selling and profit-taking.
Despite Tuesday’s rout, many analysts and traders remain bullish on grains near term.
“I don’t see the fundamentals have changed. We’re just seeing a washout from the overbought conditions that we’ve had,” said Shawn McCambridge, analyst at Prudential Bache Commodities in Chicago.
“We’ve had a good run to the upside based on good, strong demand coming into the market, but things have quieted down.”
Copper futures in London closed down $149 at $10,011 after hitting record highs at $10,190 a tonne. In New York, U.S. copper ended 2 percent down at $4.5360 a lb after setting an all-time peak at $4.6495.
Gold prices rose to a four-week high as inflation worries sparked a technical breakout, and as Chinese data curbed expectations for further interest rate hikes there.
Spot gold rose 1 percent to above $1,374 an ounce. U.S. gold futures settled up $9 at above $1,374 an ounce.
Gold is on track for a third week of gains, recovering from the losses it made in January when rising appetite for risk fueled buying of higher-yielding assets.
(Editing by Alden Bentley and Lisa Shumaker)