Week In Review: Stocks Rally Despite Terror Attacks

Byinfo@50park.com

Bulls Back In Control

Stocks rallied sharply last week despite an uptick in terror attacks. The bulls showed up and defended the 50 DMA line for the S&P 500 and Mario Draghi said free (a.k.a. easy) money is here to stay. Stepping back, the bulls are clearly in control of this market as the major indices are now up 7 of the past 8 weeks and are once again flirting with record highs. Leadership remains very narrow as the Nasdaq 100 type stocks continue to soar while small and mid cap stocks continue to lag. We have to expect sideways/higher prices to follow as long as the bulls manage to defend the 50 DMA line for the S&P 500, Nasdaq and Dow Jones Industrial Average. Considering how strong the bulls are right now we do expect the market to rally from here but would not be surprised to see the major indices futz (And No, futz is not a technical term) around here as we approach year-end. That is exactly what happened in 2011 which set the stage for a strong 2012-2015. The big difference is that we are now 6.75 years into this bull market and in 2011 the bull market was only two years old. So far, all that matters is the free money that is sloshing around the world from global central banks. As long as stocks react well to easy money, we do not want to fight this very strong tape.

Monday-Wednesday’s Action: Stocks Rally Off 50 DMA

Stocks rallied sharply on Monday on the first trading day after the horrific events in Paris. In M&A news, Starwood Hotels ($HOT) agreed to be acquired by Marriott ($MAR) for $72.08/share. supported by expectations of additional stimulus from the ECB.

Stocks opened higher on Tuesday but closed mixed after a plane in Boston was grounded because a women tried to open the exit door and a soccer game in Germany was canceled due to a terror threat. European stocks rallied sharply after rumor spread that the ECB may print more money (QE) in the months ahead to stimulate their already weak economy. Last month, before the horrific events in Paris, ECB President Mario Draghi already said he is open to increasing and possibly extending QE, if needed. In other news, Greece reached a preliminary deal with its international lenders. Inflation data remained at bay with October’s consumer price index (CPI) rising 0.2% which matched the Street’s estimate. Industrial production fell -0.2%, missing estimates for +0.1%. The housing market index came in at 62, missing estimates for 64.
 
Stocks rallied sharply on Wednesday after the Fed released the minutes from their last meeting which basically said they are ready (if the data warrants) to raise rates in December. All year they have been telling us they are ready to raise rates and never do. We pay attention to what the Fed does, not what they say. At this point, we’ll believe it when it actually happens until then it is just rhetoric.  In other news, housing starts fell a steep -11.0% in October to 1.060 million, missing estimates for 1.162M.

Thursday-Friday’s Action: Stocks Are Strong

Stocks were quiet on Thursday as investors digested this week’s big rally.Overnight, the Bank of Japan kept monetary policy unchanged. In the U.S.,  Jobless claims came in at 271k, missing estimates for 270k. The Philly Fed Survey came in at 1.9, beating estimates for 0.0. Leading indicators came in at 0.6%, beating estimates at 0.5%. Several Fed heads spoke on Thursday and reiterated their recent stance.In other news, United Health ($UNH) said they may withdraw from the Affordable Care Act (a.k.a Obamacare) due to financial pressure. Square ($SQ) and Match.com ($MTCH) went public on Thursday. Friday was an options expiration day which typically leads to heavy volume. Before Friday’s open, European Central Bank President Mario Draghi said that the ECB will do what it must to raise inflation as quickly as possible. That basically means, more free money! The ECB’s next monetary policy meeting is scheduled for Dec. 3. On Friday, terrorists took 170 people hostage in Mali Hotel which was the latest in a series of ominous terror attacks.

Market Outlook: Aging Bull Market

This bull market is aging by any normal definition and will celebrate its 7th anniversary in March 2016. The last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007. The fact that easy money is here to stay (for now) is all that matters. Everything else is noise. Eventually that will change, but for now the bulls remain in control. As always, keep your losses small and never argue with the tape. If you want exact entry and exit points in leading stocks, or access more of Adam’s commentary/thoughts on the market – Join FindLeadingStocks.com. FREE Stock market commentary, stock analysis, financial newsletter, winning stocks.

 

 

Similar Posts

  • Quiet Day On Wall Street

    Byinfo@50park.com

    It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines as this market proves resilient and simply refuses to go down. 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.

  • Bernanke Fails To Inspire Markets

    Byinfo@50park.com

    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. 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 several distribution days emerge or 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.

  • Day 1 Of A New Rally Attempt

    Byinfo@50park.com

    Stocks took a heavy beating on Thursday, sending all the major averages below their respective 200 DMA lines on heavy volume. Stocks ended higher on Friday after the S&P 500, Russell 2000 and Nasdaq Composite all shook out below their May 6, 2010 (flash crash) low. For the week, all the major averages suffered tremendous losses and fell over -10% from their late April highs, which is the first time a pullback of that magnitude has occurred since the March 2009 low. The fact that the market rallied on Friday technically marked Day 1 of a new rally attempt which means the earliest a proper follow-through day (FTD) could occur would be Wednesday, providing Friday’s lows are not breached. However, if at anytime, Friday’s lows are breached, then the day count will be reset. What does all of this mean for investors? Simple, the market remains in a correction which reiterates the importance of adopting a strong defense stance until a new rally is confirmed. Trade accordingly.

  • Stocks Fall After Nikkei Plunges over 6% As Correction Deepens!

    Byinfo@50park.com

    Monday, March 14, 2011 Stock Market Commentary: Japan’s benchmark Nikkei index plunged over -6% on Monday as the country struggles to contain the effects of Friday’s devastating earthquake. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective…