31 Aug
Daily Market Commentary

Volatile Month Finally Ends!

Wednesday, August 31, 2011
Stock Market Commentary:

Stocks were quiet on Wednesday as they continue to consolidate their very strong week-long +7% rally. The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. Even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

ADP Jobs Report Does Not Disappoint:

Before Wednesday’s open, ADP, the country’s largest private payrolls company, said U.S. employers added +91,000 new jobs in August which barely missed the Street’s 100k estimate. The news bodes reasonably well for Friday’s much anticipated non farm payrolls report. The major averages ended in the red this month but enjoyed sharp gains in the final week of August. It is important to note that the market is simply bouncing on light volume towards their respective 50 and 200 DMA lines. It will be critical to see how stocks react when they get to that important inflection point.
Market Outlook- Confirmed Rally!
The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.
 

30 Aug
Daily Market Commentary

Stocks Rally On FOMC Minutes

Tuesday, August 30, 2011
Stock Market Commentary:

Stocks were relatively quiet on Tuesday as stocks paused to consolidate their very strong week-long +7% rally. The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. Even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

Confidence Falls; Home Prices Tick Higher, & Fed Minutes:

On Tuesday, the Conference Board’s confidence index tanked to -44.5, the weakest since April 2009, from a revised 59.2 reading in July. The sharp decline in confidence largely reflects a plunging stock market and a weakening global economy. The decline was the largest point drop since October 2008 and missed the Street’s estimate for 52. The S&P/Case-Shiller index of home values in 20 cities fell -4.5% from June 2010. Home prices, according to the index, slid -4.6% from May 2010 to May 2011, however, barely topped the Street’s -4.6% estimate.
Since the latest FTD, the benchmark S&P 500 soared +7.5% but still remains down over -6% for August and down -4.1%for 2011. The FOMC released the minutes of their latest meeting which showed that several policy makers favored more aggressive action to stimulate the economy and lower unemployment. The unidentified members, “felt that recent economic developments justified a more substantial move.” Stocks edged higher since this showed Wall Street that QE3 is not off the table.

Market Outlook- Confirmed Rally!

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.
 

29 Aug
Daily Market Commentary

Stocks Rally As Greek Banks Consolidate

Monday, August 29, 2011
Stock Market Commentary:

Stocks rallied on Monday as E.U. debt woes continued to ease and buyers continued accumulating shares as this extremely volatile month begins its final week. The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. Even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

E.U. Debt Woes Ease, Housing Data Still Weak, & Stocks Extend Gains

Before Monday’s open,  European exchanges were higher after news spread that EFG Eurobank and Alphabank, two of Greece’s troubled financial institutions, merged. The consolidation was viewed as a sign of progress toward a more stable banking system for the debt-stricken nation. Economic data in the U.S. was mixed. Personal income rose last month by +0.3%, which missed the Street’s +0.4% estimate. The “good” news was that spending jumped +0.8% which easily topped the Street’s +0.5% estimate. A separate report showed pending home sales fell in June by -1.3%, which modestly beat the Street’s estimate for a decline of -1.4%. It was very encouraging to see the broad based rally, which was confirmed with last Tuesday’s FTD, get stronger.

Market Outlook- Confirmed Rally!

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.
 

26 Aug
Daily Market Commentary

Stocks Confirm New Rally Attempt

Friday, August 26, 2011
Stock Market Commentary:

Stocks ended higher this week, snapping a 4-week losing streak and confirmed their latest rally attempt on Tuesday when a proper follow-through day  (FTD) emerged. From our point of view, the market is simply pausing to consolidate its recent shellacking (15-18% from late July to early August). The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. Even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

Monday-Wednesday’s Action: New Rally Attempt

Over the weekend, Libyan rebels made significant progress in their ongoing attempt to over throw Qaddafi’s oppressive 42-year regime. Stocks confirmed their latest rally attempt on Tuesday when the tech-heavy Nasdaq composite surged +4.29% on heavier volume than Monday’s session. Before Tuesday’s open, Germany’s ZEW Economic Sentiment Survey tumbled to -37.6 in August from -15.1 in July. In France, the country’s preliminary Manufacturing PMI slid to 49.3 in August from 50.5 in July. The broader Eurozone data also failed to impress. The Eurozone Manufacturing PMI fell to 49.7 in August from 50.4 in the prior month. The Eurozone ZEW Economic Sentiment reading plunged to -40.0 from -7.0 in July. In the U.S., new home sales fell to a five month low and missed estimates. The Commerce Department said new home sales slid -0.7% to a seasonally adjusted 298,000-unit annual rate which was the lowest reading since February. June’s pace was revised down to 300,000 units from the previously reported 312,000 units. The one glimmer of hope was that supply, a critical component to determining market price, fell sharply. Despite the weaker than expected economic data from Europe and the U.S., it was interesting to see stocks rally as hope spread that Bernanke’s Jackson Hole speech on Friday will have the same effect as it did last year on risk assets.
On Wednesday, Moody’s cut Japan’s credit rating one step to Aa3, with a stable outlook as the nation continues to work its way out of the horrible earthquake back in March. In the U.S., the Commerce Department said durable goods jumped +4% last month which easily topped the average estimate of +2%.

Thursday & Friday’s Action: Stock Rally After Bernanke’s Speech

Stocks opened higher on Thursday but quickly turned lower after rumors spread that Germany’s credit rating may be cut. The rumors were put to bed after CNBC said S&P, Moody’s Investors Service, and Fitch Ratings affirmed their AAA ratings. In the U.S., the Labor Department said weekly jobless claims rose to +417k last week which easily topped the 405k expectation and bodes poorly for the ailing jobs market. In other news, Apple’s legendary CEO, Steve Jobs, resigned as CEO (but will remain Chairman) and Tim Cook, his long-time #2, took over as CEO.

Buffett Takes Major Stake in BAC

The other major headline on Thursday was that Warren Buffett would invest $5 billion in Bank of America (BAC). An CNBC.com reported, “Bank of America will sell Berkshire 50,000 shares of cumulative perpetual preferred stock with a 6 percent annual dividend, it said in a statement Thursday. Bank of America can buy back the investment at any time by paying Buffett a 5 percent premium. Berkshire also will get warrants to buy 700 million Bank of America shares at an exercise price of just over $7.14 a share, with the ability to exercise any time in the next 10 years.” There is a lot of confusion as what the deal means. From our point of view, Buffett will collect a major premium the entire time he holds the warrants. If/when BAC is in a position to buy them back he will get an additional 5% over his annual 6% dividend. However, if BAC’s shares go to ZERO he losses $5billion.

Bernanke Reaffirms Outlook
Before Friday’s open, the government lowered their reading on Q2 GDP from 1.3% to 1%. Despite a quick sell off stocks bounced after Ben Bernanke reaffirmed his current stance and did not announce QE 3.

Market Outlook- Confirmed Rally!

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

25 Aug
Daily Market Commentary

Stocks Fall on Fresh EU Woes

Thursday, August 25, 2011
Stock Market Commentary:

Stocks suffered a distribution day (heavy volume decline) on Thursday after fresh concern spread from Europe. A heavy volume decline so close to a follow-through day (FTD) puts pressure on this nascent rally. Therefore, the current rally is under pressure until the bulls show up and regain control of this market (a high volume rally). The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. Even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

German Jitters Smack Stocks & Steve Jobs Resigns:

Stocks opened higher on Thursday but quickly turned lower after rumors spread that Germany’s credit rating may be cut. The rumors were put to bed after CNBC said S&P, Moody’s Investors Service, and Fitch Ratings affirmed their AAA ratings. In the U.S., the Labor Department said weekly jobless claims rose to +417k last week which easily topped the 405k expectation and bodes poorly for the ailing jobs market. In other news, Apple’s legendary CEO, Steve Jobs, resigned as CEO (but will remain Chairman) and Tim Cook, his long-time #2, took over as CEO.

Buffett Takes Major Stake in BAC:

The other major headline on Thursday was that Warren Buffett would invest $5 billion in Bank of America (BAC). An CNBC.com reported, “Bank of America will sell Berkshire 50,000 shares of cumulative perpetual preferred stock with a 6 percent annual dividend, it said in a statement Thursday. Bank of America can buy back the investment at any time by paying Buffett a 5 percent premium. Berkshire also will get warrants to buy 700 million Bank of America shares at an exercise price of just over $7.14 a share, with the ability to exercise any time in the next 10 years.” There is a lot of confusion as what the deal means. From our point of view, Buffett will collect a major premium the entire time he holds the warrants. If/when BAC is in a position to buy them back he will get an additional 5% over his annual 6% dividend. However, if BAC’s shares go to ZERO he losses $5billion.

Market Outlook- Rally Under Pressure!

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. However, since then, they have gone virtually “no where” which puts the current rally under pressure. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

24 Aug
Daily Market Commentary

Japan's Credit Cut & Durable Goods Top Estimates

Wednesday, August 24, 2011
Stock Market Commentary:

Stocks confirmed their latest rally attempt on Tuesday when the tech-heavy Nasdaq composite surged +4.29% on heavier volume than Monday’s session. This confirmed the latest rally attempt which began 11 days ago on August 9, 2011. The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. Even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

Japan’s Credit Cut & Durable Goods Top Estimates:

On Wednesday, Moody’s cut Japan’s credit rating one step to Aa3, with a stable outlook as the nation continues to work its way out of the horrible earthquake back in March. In the U.S., the Commerce Department said durable goods jumped +4% last month which easily topped the average estimate of +2%.

Market Outlook- New Rally Confirmed!

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. This action suggests a subtle and bullish shift may be on the horizon. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

23 Aug
Daily Market Commentary

New Rally Confirmed!

Tuesday, August 23, 2011
Stock Market Commentary:

Stocks confirmed their latest rally attempt on Tuesday when the tech-heavy Nasdaq composite surged +4.29% on heavier volume than Monday’s session. This confirmed the latest rally attempt which began 11 days ago on August 9, 2011. The major averages are technically in a new confirmed rally which means probing the long side may be prudent, if/when high ranked stocks begin to trigger fresh technical buy signals. Even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

European and U.S. Economic Data Remains Soft:

Before Tuesday’s open, Germany’s ZEW Economic Sentiment Survey tumbled to -37.6 in August from -15.1 in July. In France, the country’s preliminary Manufacturing PMI slid to49.3 in August from 50.5 in July. The broader Eurozone data also failed to impress. The Eurozone Manufacturing PMI fell to 49.7 in August from 50.4 in the prior month. The Eurozone ZEW Economic Sentiment reading plunged to -40.0 from -7.0in July. In the U.S., new home sales fell to a five month low and missed estimates. The Commerce Department said new home sales slid -0.7% to a seasonally adjusted 298,000-unit annual rate which was the lowest reading since February. June’s pace was revised down to 300,000 units from the previously reported 312,000 units. The one glimmer of hope was that supply, a critical component to determining market price, fell sharply. Despite the weaker than expected economic data from Europe and the U.S., it was interesting to see stocks rally as hope spread that Bernanke’s Jackson Hole speech on Friday will have the same effect as it did last year on risk assets.

Market Outlook- New Rally Confirmed!

The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. This action suggests a subtle and bullish shift may be on the horizon. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

22 Aug
Daily Market Commentary

The Sideways Action Continues

Monday, August 22, 2011
Stock Market Commentary:

Stocks bounced off support as buyers showed up and cheered the news that Libyan rebels are very close to toppling the Qaddafi regime. In the U.S., the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s (8.16.11) lows hold. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce. Near term resistance remains the 200 DMA line and near term support remains the 2011 lows.

Libyan Rebels Capture Qaddafi’s Sons & Death Cross In Major Averages:

Over the weekend, Libyan rebels made significant progress in their ongoing attempt to over throw Qaddafi’s oppressive 42-year regime. Economic news was quiet on Monday as investors await new home sales, durable goods orders, gross domestic product, and Ben Bernanke’s speech at the Fed’s annual Jackson Hole, Wyoming symposium later this week.
We are a bit surprised that virtually “no one” is talking about the fact that all the major averages’ 50 DMA lines undercut their longer term 200 DMA lines earlier this month. This is also known as a “death cross” which suggests, lower, not higher prices lie ahead. However, this is not 100% accurate. The last time this happened was July 2010 but the sell off was short lived and stocks rallied hard over the next 10 months (largely thanks to Bernanke’s Jackson Hole speech where he announced QE 2). It is very important for the major averages to continue trading above their August lows in order for this market to rally. Conversely, if August’s lows are breached, one could expect another leg lower in this brutal month-long correction.

Market Outlook- Market In A Correction

The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.

19 Aug
Daily Market Commentary

4th Consecutive Weekly Decline!

Friday, August 19, 2011
Stock Market Commentary:

Stocks ended lower for the fourth consecutive week as fear spread that the global economy is slowing and inflation is accelerating throughout much of the developed world. In the U.S., the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s (8.16.11) lows hold. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce. Near term resistance remains the 200 DMA line and near term support remains the 2011 lows.

Monday-Wednesday’s Action: Oversold Bounce

Stocks rallied enjoyed large gains on Monday after some $19 billion of new M&A news was announced. However, volume, a critical component of institutional sponsorship was very light. One of the most popular deals was Google’s (GOOG) announcement that they planned to acquire Motorola Mobility Holdings (MMI) for $12.5 billion. On Tuesday stocks slid after the Commerce Department reported that housing starts slid -1.5% to a seasonally adjusted annual rate of 604,000 units. A separate report showed U.S. industrial output rose +0.9% last month, more than double June’s +0.4% and the fastest gain in 7 months. In Europe, France and Germany ruled out a new Euro Bond which was designed to help alleviate Europe’s onerous debt burdens but agreed to several other factors aimed at restoring confidence in the troubled continent. The latest GDP data out of Europe missed estimates.
Stocks ended higher on Wednesday as investors digested the latest round of economic data. The Mortgage Bankers Association (MBA) said mortgage applications slid by a disturbingly large -9.1%. Separately, the Labor Department said its produce price index (PPI) rose +0.2% despite lower energy prices. Core prices, which exclude food and energy, rose +0.4% which was the largest increase since January and rose+0.3% in June. Since the March 2009 bottom, inflation has remained largely at bay which has helped alleviate pressure on the Federal Reserve to raise rates. However, if inflation swells over the next few quarters than the Fed may be put in a precarious situation; raise rates to curb inflation or leave rates low to stimulate the stale economy?

Thursday & Friday’s Action: Risk Assets Smacked:

Continue reading

18 Aug
Daily Market Commentary

Selling Resumes!

Thursday, August 18, 2011
Stock Market Commentary:

Stocks gapped down on Thursday as fresh fears spread regarding European debt. In the U.S., the window remains open for a new FTD to emerge which will confirm the current rally attempt. Technically, as long as last Tuesday’s (8.16.11) lows hold- there is a strong chance that the markets may be forming a short-term low. However, there is no rush to buy ahead of a FTD because doing so increases the odds of failure. To be clear, the bears remain in control of this market until the major averages close above their longer term 200 DMA lines or a new FTD emerges. A new follow-through day will emerge when at least one of the major averages rallies at least +1.8% on higher volume than the prior session. Until that happens, this is just a normal “oversold” bounce. Near term resistance remains the 200 DMA line and near term support remains the 2011 lows (last week’s low).

EU Debt & Lackluster Economic Data Hurts Stocks!

Before Thursday’s open, overseas markets were down several percentage points after news spread that a European bank borrowed $500M from the ECB. This sparked fresh concerns that European banks may be under severe stress. Economic data in the U.S. was not ideal. The Labor Department said weekly jobless claims rose to 408,000 which topped the Street’s estimate for 400,000. This bodes poorly for the ailing jobs market and by extension the broader economy.
Separately, the consumer price index (CPI) rose by +0.5% in July which easily topped the Street’s estimate for a +0.2% increase. This echoes Wednesday’s higher than expected produce price index (PPI) which suggests inflation may be accelerating. If inflation continues to increase, then the Fed will be under pressure to raise rates in the near future. The Philly Fed Survey tanked to -30.7 which was way below the Street’s estimate for 1.0. Existing home sales slid last month to an annualized rate of 4.67 million, which is less than the rate of 4.87 million units that had been expected. On a positive note, leading indicators edged higher +0.5% in July which topped the +0.2% estimate.

Market Outlook- Market In A Correction

The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.

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