Week In Review: Strong Week On Wall Street

Byinfo@50park.com

Stocks Rally On Greek Deal

Stocks rallied nicely last week helping the tech-heavy Nasdaq 100 breakout of its year-long range and hit a fresh 15-year high. The market was able to breathe a collective sigh of relief when the two big threats (Greece and China) were temporarily resolved. Stocks rallied after it became clear that Greece would not leave the euro zone. Separately, the panic selling in China eased a bit after the Chinese government literally shut down a big chunk of their stock market, printed money to buy stocks, banned and arrested short sellers in an attempt to curb the selling. The real kicker is that neither situation has been permanently resolved. That’s why it is important to note that in bull markets (present market included), stocks rally regardless of the news. From where we sit, the reaction to the news, matters a lot more than the news itself. For now, we are still in a very strong (but aging) bull market which, by definition, means the path of least resistance remains higher (until any material technical damage emerges).

Monday-Wednesday’s Action: Stocks Rally On Greek Deal

Stocks soared on Monday after lengthy negotiations between Greek officials and euro zone creditors produced a framework for the third bailout package for the tiny nation-state in the past few years. The latest agreement includes EUR 25 billion in bank recapitalization funds to help keep Greece in the eurozone (for now). The deal requires Greece to streamline value-added taxes, broaden its tax base to increase revenue, curb pension costs, and privatize public assets worth as much as 50 billion euros into a separate trust. Economic data was light, the Treasury Budget statement for June showed a surplus of $51.80 billion, beating the consensus for a $51 billion surplus.
Stocks rallied for a fourth straight day on Tuesday after a US-led coalition of 5 other nations inked a deal with Iran regarding their nuclear program. In the US, economic data did not impress. Retail sales fell -0.3%, missing estimates for a gain of +0.3%. The NFIB small business optimism index was 94.1, missing estimates for 97.5. JPMorgan Chase ($JPM) and Wells Fargo ($WFC) both rallied after reporting Q2 results.  On Wednesday, stocks opened higher but closed lower after Greek protests turned violent in Athens before the Greek parliament passed their latest bailout package. In earnings news, Bank of America ($BAC), PNC ($PNC) and U.S. Bancorp ($USB) all rallied after releasing their Q2 results. Celgene  ($CELG) raised guidance and said they are buying  Receptos (RCPT) for $232/share in cash, causing both biotech stocks to gap higher. The Biotech ETF ($IBB) broke out and continues to be a very strong group for this 6.5 year bull market. Elsewhere, Janet Yellen told the House Financial Services Committee that she expects a rate hike later this year if economic conditions hold up. Economic data was mixed. Producer prices rose +0.4% in June, beating estimates for a gain of +0.3%.  The Empire Manufacturing Survey for July came in at 3.86, beating the forecast for 3.5. Industrial production rose 0.3% in June, beating estimates for a 0.2% gain. The Atlanta Fed Business Inflation expectation came in at 2%, slightly higher than the 1.9% estimate. The Fed’s beige book showed economic activity is still not humming.

Thursday-Friday’s Action: Financials, Netflix, Ebay, Google Among Big Earnings Winners So Far

The Nasdaq 100 broke out of its year-long trading range and hit a new 15-year high on Thursday as investors digested a slew of economic and earnings data. Overseas, the ECB held rates steady, said Greece’s place in the Euro is not doubted, and raised emergency funding.  Netflix ($NFLX), Citigroup ($C) and Ebay ($EBAY) rallied after reporting their latest quarterly results. Jobless claims came in at 281k, beating estimates for 282k. The Philly Fed index slowed considerably to 5.7, missing estimates for 12.0. The housing market index was unchanged at 60, beating estimates for 59. Ms. Yellen testified to the Senate and reiterated her recent stance. Stocks were relatively quiet on Friday as the market paused to digest the latest rally. Economic data was mixed, the consumer price index rose 3% which matched estimates. Housing starts jumped to 1.174M, beating estimates for 1.125M. Consumer sentiment came in at 93.3, missing estimates for 96.0.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. 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. Consider joining SarhanCapital.com.

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  • Lousy Week For Stocks

    Byinfo@50park.com

    Friday, July 15, 2011
    Stock Market Commentary:
    Stocks ended lower for the week but managed to stay near their respective 50 DMA lines which is an encouraging sign. The benchmark S&P 500 index sliced and closed below its 50 DMA line on Thursday which is not ideal. Meanwhile, the Dow Jones Industrial Average and the tech heavy Nasdaq composite managed to stay above their respective 50 DMA lines. Once all the major averages violate their respective 50 DMA lines, the rally will end and the bears will have regained control of this market. Looking forward, the next level of resistance is their respective 2011 highs.
    Monday- Wednesday’s Action: Stocks Slide On Debt Woes
    Over the weekend, fresh debt concerns surfaced from the U.S. and Europe which put pressure on stocks and a slew of commodities. In Europe, an emergency session was held to discuss Italy’s mounting debt woes. Before Tuesday’s open, the euro was smacked as fresh debt woes surfaced throughout Europe and the debt/deficit situation in the U.S. remains unresolved. Euro zone finance ministers promised a more flexible approach to deal with Greece and other troubled nations. However, markets across the world did not believe their rhetoric. A newspaper report showed that six Spanish banks failed the EU stress tests which are slated to be released on Friday. Elsewhere, the U.S. trade deficit soared to a 3 year high in May thanks in part to lower exports. The Commerce Department said the deficit surged +15.1% to +50.2 billion in May which is the largest imbalance since October 2008.
    At 2pm EST, the minutes of the Federal Reserve’s June meeting were released and showed that Fed officials did not rule out QE3. Stocks sold off after a short-lived initial bounce on the news. Shortly after the Fed minutes were released, Moody’s rating agency downgraded Ireland’s debt rating to junk which sent stocks lower. Finally, Alcoa (AA) officially kicked off earnings season after Monday’s close when they released their Q2 results. Needless to say, it will be interesting to see how the major averages react to earnings over the next few weeks.
    Before Wednesday’s open, China said its gross domestic product (GDP) slowed to a rather strong +9.5% last quarter. This was slightly lower than Q1′s strong reading of +9.7% but slightly higher than the Street’s +9.4% expectation. It is important to note that Beijing has been rather vocal in their attempts to curb inflation and their red-hot economy. In the U.S., Ben Bernanke made it abundantly clear that the Fed is willing to step up and ease monetary policy (i.e. QE 3) again, “if needed.” This sent the dollar lower and a slew of dollar denominated assets (i.e. risk assets) higher. On a rather sad note, a series of bombs rocked the financial district of Mumbai, killing at least 21 people and injuring 141 in what most believe to a terrorist attack.
    Thursday & Friday’s Action: 50 DMA line Is Support!
    On Thursday, investors digested a slew of economic data, most of which topped estimates. The Labor Department said, weekly jobless claims fell -22,000 to 405,000 last week which is much closer than to the closely followed 400,000 mark. The latest read on inflation was tame which helped ease pressure on the Fed to raise rates in the near future. The producer price index (PPI) fell -0.4% which was below the -0.3% forecast.
    Retail sales rose +0.1% which topped the unchanged reading expected by Wall Street. Bernanke spent most of his day testifying on Capital Hill where he made it clear that he was not immediately ready to embark on QE 3. Stocks immediately sold off on the news. The pressure in D.C. is palpable regarding the ongoing debt/deficit talks. The President knows that the country is at a critical juncture and if this issue is not resolved swiftly the ramifications will be ominous, it will tarnish his legacy, and most likely cost him a second term in office. After Thursday’s close, Google (GOOG) surged over 10% after smashing Q2 estimates which bodes well for Q2 earnings season.
    Before Friday’s open, Citigroup (C) reported stronger than expected Q2 results which bodes well for the ailing financial sector. Economic data was mixed. The consumer price index (CPI) slid -0.2% which matched the Street’s estimate. Core CPI, which excludes food and energy, rose +0.25%. Elsewhere, the Empire State Manufacturing Index fell -3.76 last month which fell short of the Street’s estimates and consumer confidence tanked to the lowest level since March 2009!
    Market Outlook- Uptrend Under Pressure:
    The last week of June’s strong action suggests the market is back in a confirmed rally. As our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the current rally is under pressure as investors patiently await earnings season and continue to digest the latest economic data. Until all the major averages violate their respective 50 DMA lines on a closing basis, the market deserves the bullish benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.
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  • Stocks Soar on EU Bailout Rumors

    Byinfo@50park.com

    Market Outlook- In A Correction:
    The major U.S. averages are still in a “correction” as they continue to bounce towards resistance of their 2-month base. The latest follow-through day (FTD) which began on August 23, 2011 has officially ended which means we will continue “counting” days before a new rally can be confirmed. In addition, it is important to note that the bulls scored a victory since many of the major averages closed above their downward sloping 50 DMA lines for the first time since late July! The next stop is September’s highs and then their 200 DMA lines. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. If you are looking for specific help navigating this market, please contact us for more information.
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    On Tap This Week:
    MONDAY: Industrial production, Fed’s Lacker and Evans speak; Earnings from IBM
    TUESDAY: PPI, treasury international capital, housing market index, Bernanke speaks; Earnings from BofA, Coca-Cola, Goldman Sachs, J&J, Apple, Intel, CSX and Yahoo
    WEDNESDAY: Weekly mortgage apps, CPI, housing starts, Fed’s Rosengren speaks, oil inventories, Fed’s Beige Book; Earnings from Morgan Stanley, Travelers, United Tech, AmEx, Ebay, Western Digital
    THURSDAY: Jobless claims, existing home sales, Philadelphia Fed survey, leading indicators, Fed’s Bullard and Kocherlakota speak, NewsCorp investor day; Earnings from AT&T, Eli Lilly, Nokia, AutoNation, Microsoft, Capital One, Chipotle and SanDisk
    FRIDAY: Fed’s Kocherlakota speaks, 2011 Dodd-Frank Rulemaking Deadline; Earnings from GE, McDonald’s, Verizon, Honeywell and Schlumberger
    Source: CNBC.com

  • Stocks Rally On Favorable Economic Data

    Byinfo@50park.com

    At this point, the Dow Jones Industrial Average and the NYSE Composite Index have traded above resistance at their long term 200-day moving average (DMA) lines and recent chart highs. The tech-heavy Nasdaq Composite, benchmark S&P 500, and small-cap Russell 2000 index remain slightly below their recent chart highs. However, the fact that all of the major averages are trading above their respective 2-month downward trendlines bodes well for this five week rally. In order for a new leg higher to begin, all the major averages must close and remain above their respective resistance levels. Remember that the window remains open for for high-ranked stocks to be accumulated when they trigger fresh technical buy signals. Trade accordingly.

  • Earnings Season Begins Stocks; Stocks Fall

    Byinfo@50park.com

    For the most part, the major averages and leading stocks are beginning to weaken as investors continue to digest the slew of economic and earnings data being released each day. Until a clear picture can be formed as to how companies fared last quarter one could easily expect to see more of this sideways action to continue. The market just completed its 45th week since the March lows and the rally remains intact as long as the major averages continue trading above their respective 50-day moving average (DMA) lines. Until those levels are breached, the bulls deserve the benefit of the doubt.