Daily Market Commentary

Week In Review: Stocks Rally Despite Terror Attacks

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.