Week-In-Review: Stocks End Week Mostly Higher

Stocks End Week Mostly Higher

This was a constructive week on Wall Street, stocks opened lower but closed higher for most of the popular indices. A subtle, yet important, sign of strength is to see a market open lower but close higher in any given period. All things being equal, the longer the period, the stronger the ramification for the market. So, the fact that the major indices opened lower last week, which was shortened holiday week, but closed higher on a weekly basis, is a bullish sign. Separately, if you look at a monthly chart, it is on track to do close to the same thing as next week will be the last week of February. Stepping back, the action is very constructive as buyers quickly showed up and are doing their best to quell the big drop we saw earlier in the month. As long as February’s lows hold, the bulls remain in control of this market.

Mon-Wed Action:

Stocks were closed on Monday in observance of the President’s Day holiday. On Tuesday, stocks fell hard after Wal-Mart ($WMT) gapped down after reporting earnings. The Dow lost 254 points as Wal-Mart suffered its worst day since 1988. Investors were spooked because the yield on the benchmark 10-year U.S. note hit the highest level since 2014. Separately, the yield jumped on the shorter-term two-year note to the highest level in 9 years. On Wednesday, stocks opened higher but closed lower after sellers showed up in the last hour of the day and aggressively sold stocks. At 2pm EST, the Fed released the minutes of its latest meeting which showed policy makers are ready to raise rates a few more times in 2018. Initially, stocks rallied after the minutes were released but closed lower as sellers showed up before the close.

Thur & Fri Action:

Stocks rallied sharply on Thursday as the yield fell on the 10-year note. In corporate news, Chesapeake Energy jumped nearly 20% after reporting earnings while shares of Roku plunged nearly 20% after they released earnings. Separately, shares of Netflix (NFLX) and Amazon.com (AMZN) hit fresh record highs. Stocks rallied on Friday as investors showed up and continued buying stocks to end the week on a positive note.

Market Outlook: Market Bouncing

The market is bouncing back after a steep 10% pullback. The big level of support to watch is February’s low and then the 200 DMA line for the major indices. For now, as long as that level holds, the longer-term uptrend remains intact. As always, keep your losses small and never argue with the tape. Want To Learn How To Invest? Sign Up For 1-on-1 Sessions With Adam Sarhan.

Week-In-Review: Stocks Bounce Back With A Vengeance

Stocks Bounce Back With A Vengeance

Last week I wrote, “The market looks like it just put in a near term low on Friday as the bulls showed up and defended the longer-term 200 DMA line.” That is exactly what happened as stocks soared last week and enjoyed their best week since 2013. I also said, “History shows us that 80% of corrections do not turn into bear markets and 20% do.” and the snap back action suggests this bull market has more room to run. Earnings are expected to grow massively and that is the big bullish catalyst that may keep this bull market alive longer-than-expected. For now, as long as February’s low holds, the bulls remain in control of this market. If support is broken, then this correction will likely get much worse. Conversely, the next level of resistance to watch are the recent highs from late January. If the market takes out those highs, that will be an incredible feat and suggest we are headed higher. Until then, I have to expect more sideways/sloppy action to continue. The market rallied hard last week and could easily pullback to digest that big run. 

Mon-Wed Action:

Stocks soared on Monday as investors scooped up shares at beaten down levels. It is important to note that the previous Friday, institutions showed up and defended the longer-term 200 DMA line which set the stage for this week’s rally. There are two important factors that occur when the market snaps back from deeply oversold levels. First, there is a tremendous amount of short covering (people buy back stock to exit their short positions) and second, the buy the dip crowd shows up and buy stocks at lower prices. Stocks opened lower and closed near their highs as buyers showed up and bought the latest dip. Once again, the market opened lower on Wednesday after inflation ticked higher but the bulls showed up and aggressively quelled the bearish pressure helping it close nicely higher by the close. The big money largely flowed into tech stocks and financials as the market jumped nicely and broke out of a small head and shoulders continuation pattern.

Thur & Fri Action:

The market rallied nicely on Thursday as investors continued buying stocks. Shares of Cisco ($CSCO) rallied nicely after the networking giant reported earnings. Separately, Amazon ($AMZN) said it will team up with Bank of America ($BAC) to offer loans to merchants. Stocks were relatively quiet on Friday as the market enjoyed its best weekly gain since 2013.

Market Outlook: Market Bouncing

The market is bouncing back after a steep 10% pullback. The big level of support to watch is February’s low and then the 200 DMA line for the major indices. For now, as long as that level holds, the longer-term uptrend remains intact. As always, keep your losses small and never argue with the tape. Want To Learn How To Invest? Sign Up For 1-on-1 Sessions With Adam Sarhan.

Week-In-Review: Stock Bounce After Very Tough Week On Wall Street

Stocks Bounce After Very Tough Week On Wall Street

The market looks like it just put in a near term low on Friday as the bulls showed up and defended the longer-term 200 DMA line. In the last two weeks, the market erased the last 10-week’s of gains. That, ladies and gentlemen, is not an insignificant sum and should not be taken lightly. Clearly, that is not aunt Jane and uncle Joe selling, it’s the big institutions. The market went from egregiously overbought to egregiously oversold in a few trading days. The vehemence of this sell-off is worrisome because we are still in a bull market. Imagine, what will happen when we enter a bear market. Stepping back, from a longer-term point of view, a nice steep correction would do wonders to restore the health of this very strong unabated bull run, it is way overdue. History shows us that 80% of corrections do not turn into bear markets and 20% do. So, if this one turns into a bear market, then we will adjust and be ready. History also shows us that markets do not top out overnight, instead tops take time to form. For now, we know the overtly strong bull market has cracked and the crazy “buy at any price” mentality is gone. That may come back, but for now, patience is paramount.

Mon-Wed Action:

The stock market imploded on Monday as sellers regained control of the market. At one point, the Dow was down 1,500 points and the S&P 500 turned negative for the year. That followed Friday’s 666 point shellacking. The financials and energy sectors were the worst performing sectors and dragged the market lower. Ray Dalio, the largest hedge fund manager in the world, tried to calm markets and said these are just ‘minor corrections,’ still lots of cash to buy the dip.” The damage over the past few days has been severe and should not be taken lightly. Stocks jumped 567 points on Tuesday as the bulls tried to regain control. On Wednesday, the Dow jumped nearly 400 points before sellers showed up and sent stocks lower by the close. That was the largest intra-day reversal in 2 years and clearly shows the bears are in control.

Thur & Fri Action:

The Dow plunged 1,000 points on Thursday as sellers aggressively sold stocks all day. To help allay any concerns about the Fed tightening too fast, Chicago Fed President Charles Evans said that the Fed will not raise rates before mid-2018. Interestingly, stocks are falling as earnings continue to be strong. Of the S&P 500 companies that had reported close to 80% had announced better-than-expected earnings which sets the stage for a strong 2018. On Friday, the market opened higher, fell hard, then reversed and closed higher after the bulls showed up and defended the longer-term 200 DMA line. As long as Friday’s lows hold, Friday appears to be a near term low.

Market Outlook: Market Correcting

The market is pulling back and the bulls are trying to defend the longer-term 200 DMA line. For now, as long as that level holds, the longer-term uptrend remains intact. As always, keep your losses small and never argue with the tape. Hit A Wall? Not Sure What To Do In The Market? We Can Help. Don’t Go It Alone, Learn More Here…
 

Week-In-Review: Stocks Finally Pullback, Now What?

Stocks Finally Pullback, Now What?

The market is finally pulling back to consolidate its very healthy and very strong advance. Remember, markets do not go up forever and it is perfectly normal (and healthy) to see the market pullback after a very strong rally to consolidate the move. Nice orderly pullbacks are healthy and allow savvy investors to step in and buy (when the weak hands are selling). Separately, it is important to note that 200-500 point daily swings are the new “normal” for the Dow. Historically, the market can easily move 1-2% on any given day (up or down) without blinking an eye. Now, that the Dow is trading near 25k, a 1% move equals 250 points. So a 200-500 point move is not as “severe” as it used to be when it represented a move greater than 2%. Right now, the market is in “pullback mode” and I expect that to continue until the major indices trade near their respective 50 DMA lines. That is the next important level of support to watch. Ideally, for the bulls, the market will pull into the 50 DMA line, sit for a little, then move higher again.   

Mon-Wed Action:

On Monday, the Dow fell 177 points as investors were concerned regarding the 10-year treasury yields. The Dow, along with the S&P 500, posted its worst decline of the year on Monday. On Tuesday, stocks fell 362 points, which was the largest decline since August 2017, as investors continued to worry about rising yields. After Tuesday’s close President Trump delivered his first State Of The Union Address and outlined a bullish path for the future. Stocks opened higher on Wednesday but gave back most of the gains on the last trading day of January. Stocks enjoyed healthy gains in January which was the best month since March 2016. Separately, the Fed held its first meeting of the year and said it was concerned about rising inflation. That is the Fed’s way of telling the market to expect more tightening going forward. Remember, one of the primary drivers of this very strong bull market has been easy money from the Fed and other central banks. So any signs (or hints) of tightening easily spooks investors. Separately, a slew of earnings were released this week with a mixed to mostly lower reaction.

Thur & Fri Action:

Stocks were quiet on Thursday as investors waited for Apple, Google, and Amazon to report earnings after Thursday’s close. Apple and Google fell while Amazon rallied after earnings. Before Friday’s open, the government said U.S. employers added 200k new jobs in January, beating the Street’s estimate for 175k. A stronger than expected jobs report strengthens the case for the Federal Reserve to raise rates which spooked investors. At one point, the Dow fell 665 points as the market continued pulling back from one of the most extended/overbought conditions in history! In last week’s report, I pointed out that the Dow was 2,000 points above its 50 DMA line and 4,000 points above its 200 DMA line. At this point, the best thing the market can do is pullback into its 50 DMA line.

Market Outlook: Bulls Are Strong

The bulls are back in control and the market remains very strong. As always, keep your losses small and never argue with the tape. Hit A Wall? Want To Achieve More Goals? We Can Help.
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