All Eyes On Earnings

Once again, the bulls remain in clear control and continue to quell any bearish selling. The market had several chances to fall (since the election) and simply refuses to do so. The fact that it refuses to fall illustrates how strong the bulls are right now and bodes well for the market. Small caps remain the strongest since the election and the Russell 2000 (IWM) is building a bullish 6-week base. The other major indices continue acting very well as the market pauses to digest the very strong post-election rally. The bulls want to see the major indices breakout and hit new highs. Looking forward, the next big catalyst is earnings season and the inauguration on Friday (1/20/17). Remember, the key is to see how the market, and your stocks, react to earnings. Until we see any heavy selling show up, weakness should be bought. U.S. stocks will be closed on Monday in observance of the MLK holiday.

Mon-Wed Action:

On Monday, stocks were mixed as energy dragged the S&P 500 and Dow Jones Industrial Average lower while the Nasdaq hit a fresh record high. We are entering earnings season and investors will, once again, turn their focus to earnings over the next several weeks. Elsewhere, AliBaba Founder, Jack Ma, met with President-Elect Donald Trump and said he plans to create over 1 million new jobs in the U.S. over the next five years. Stocks were relatively quiet on Tuesday as the market waited for earnings season to begin. Small Business Optimism Index surged on renewed hopes of pro-business policies from the incoming Trump administration. On Monday, Trump praised Fiat Chrysler after the automaker said it plans to invest in Ohio and Michigan. Trump sent out a tweet thanking Ford Motor for saying last week it would expand in Michigan rather than build a plant in Mexico. In other news, Yahoo said it will change its name to “Altaba” after the sale to Verizon is complete. Separately, shares of Chioptle Mexican Grill (CMG) rallied after the company slashed its outlook. Finally, shares of Valeant Pharmaceuticals rallied after the company said it will sell its skincare brands to L’Oreal. Stocks rallied on Wednesday after President-Elect Trump held his first press conference of 2017. The tech heavy Nasdaq composite closed at a record high while the Dow Jones Industrial Average continued to trade just below 20,000. Meanwhile, the Mexican Peso hit a fresh record low after Trump reiterated his intention to build a wall.

Thur & Fri Action:

Stocks fell on Thursday after Trump’s first Press conference of 2017. The selling came overnight after investors failed to see new comments or urgency to tax reform or deregulation. Stepping back, the Dow Jones Industrial Average continues trading just below 20,000 and all the major indices are very extended on a technical basis. Separately, earnings season officially began and investors are waiting for earnings from several big banks on Friday and over the next few weeks. Stocks were relatively quiet on Friday as investors digested the latest round of earnings from a few of the big banking centers. So far the action is mixed. JPMorgan Chase, Bank of America and PNC Financial all beat on earnings, but only JPMorgan beat on revenue estimates. Separately, BlackRock (BLK), posted better-than-expected earnings, helped by lower expenses and a rush into low-cost exchange-traded funds.

Market Outlook: Strong Action Continues

The market remains strong as the Dow continues flirting with the 20,000 level. Once again, central banks came to the rescue and sent stocks racing higher. The ECB extended QE in December and will print another 2.4T to stimulate markets and the global economy. The U.S. Fed only raised rates once in 2016, by a quarter point to 0.50%, which, historically,  is still very low. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today –  if you want Adam to manage your portfolio or talk about your investment needs. Visit: 50Park.com