Week-In-Review: Market Snaps A 3-Week Win Streak

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Week-In-Review: Market Snaps A 3-Week Win Streak

The market fell last week and snapped a 3-week win streak after the major indices flirted with fresh record highs. The Federal Reserve cut rates by 25 basis points which matched expectations and was largely priced in to the market. The major indices had a big move over the past few weeks and it is normal to see them pullback after flirting with resistance (the recent record high). Going forward, it is important to analyze the “health” of this pullback to see if it is another normal and healthy pullback or something more severe. A normal and healthy pullback will bring the major indices back into support (their respective 50 DMA lines). If the 50 DMA line breaks, then that will indicate something more severe may unfold. For now, the bulls deserve the benefit of the doubt as long as the market stays above support. 

Monday-Wednesday’s Action:

Over the weekend, oil prices spiked after Saudi Arabia said one of its key supply hubs was attacked by drones. This was a concerted attack and it caused a lot of damage. Oil prices surged nearly 14% on Monday which is a huge move for oil! Meanwhile, US stocks fell as fear spread that this could escalate if the military gets involved and some feared that a regional war erupts. In other news, China said industrial production fell to a new 17½-year low. Production rose +4.4% in August which missed the Street’s estimate of a +5.2% gain. The industrial-production slowdown bodes poorly for the global economy. Stocks were relatively quiet on Tuesday as investors waited for the Fed to concluded its 2-day meeting. Separately, crude oil fell 5% after Saudi Arabia said it will increase production to offset what was lost due to the attack. In other news President Trump signaled that a trade deal could happen soon which helped the market edge higher. On Wednesday, the Fed cut rates by a quarter point but it was divided on future action and that initially sent stocks lower. But during the press conference the market reversed and closed higher after Jay Powell said that the Fed’s action is designed to send asset prices higher. Stocks reversed from a 211 point decline to close higher. In other news, shares of ROKU fell hard after Comcast and Facebook both announced desktop TV devices.

Thursday & Friday Action:

Stocks were quiet on Thursday as the market flirted with fresh record highs. Shares of Microsoft rallied sharply after the company said it plans to buy back a lot of stock. Stocks trimmed some of the gains in the afternoon after a state-backed Chinese media report said that known China hawk and Trump advisor Michael Pillsbury warned the U.S. is ready to escalate the trade war if a deal isn’t struck soon. Stocks fell on Friday after Chinese trade negotiators suddenly canceled a visit to meet U.S. farmers after they wrapped up trade talks in Washington this week.

Market Outlook: Easy Money Is Back

Once again, global central banks are back on the easy money bandwagon after the Fed and the ECB both announced more easy money measures in September which are directly aimed at stimulating global markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. Earlier this year, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks appear to be moving in the right direction which is another positive. As always, keep your losses small and never argue with the tape.

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Week-In-Review: Stocks Flirt With Record Highs

Market Flirts With Record Highs

The market rallied nicely last week after more easy money was announced and both the U.S. and China played nice regarding the ongoing trade spat. In the short-term, the major indices are very extended to the upside and are over due to pullback. Near term support is the 50 day moving average for the major indices and as long as the market stays above that level the bulls remain in clear control. Beyond that, keep in mind, the Fed meeting is around the corner and then we are heading into the end of month – and – the end of quarter which could easily translate into a nice upward bias. 

Monday-Wednesday’s Action:

Stocks opened higher on Monday but closed mixed to mostly lower as the market pulled back to digest the recent (and robust) rally. Treasury Secretary Steven Mnuchin said Monday morning that China and the U.S. have a “conceptual agreement” on enforcement mechanisms around intellectual property theft, one of the more contentious negotiation points between the two countries which is another welcome sign that next month’s “talks” may actually move the needle. On Tuesday, stocks slid but buyers showed up near the 50 DMA line (support) which is a near term healthy sign. Wednesday marked the 18th Anniversary of 9/11 and the market responded as it normally does no 9/11 with a nice rally. If you look back them market has been up on just about every 9/11 since 2002. Wednesday’s rally was attributed to the fact that the bulls showed up and defended support near the 50 DMA line for the major indices. Separately, President Trump pushed the tariffs back two weeks and then China responded and eased some of its trade restrictions on U.S. agricultural goods and that helped the market take a breath. It was the first sign of de-escalation in a very long time. 

Thursday & Friday Action:

On Thursday, stocks ended higher after the ECB concluded its latest meeting and added more easy money to the party. That helped the market come within striking distance of a fresh record high. Stocks were relatively quiet on Friday as investors wrapped up a strong week.

Market Outlook: Easy Money Is Back

Once again, global central banks showed up and juiced markets and that was confirmed when the ECB announced more easy money measures. Before, that, James Bullard, who serves as a proxy for Jay Powell, came out and gave dovish comments which also boosted markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. Earlier this year, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks look to be on the mend. As always, keep your losses small and never argue with the tape.

 

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Week-In-Review: Bullish Week On Wall Street

Bullish Week On Wall Street

The market rallied sharply last week after news broke that the U.S. and China will sit down next month and hopefully resolve their trade dispute. Technically, it was a bullish week as the major indices jumped above their respective 50 DMA lines which has served as formidable resistance over the past few weeks. Additionally, several lagging sectors also caught a nice bid and they rallied after being under pressure for most of August. The Transports (IYT), Financials (XLF), Semiconductor (SMH), Housing Stocks (XHB), Industrials (XLI), just to name a few. Even retail stocks (XRT), which have been in a bear market recently, managed to briefly jump back above its respective 50 DMA line. There are still many lagging areas but that is normal as the market trades in a long sideways trading range and a few percentage points below a record high. Remember, stepping back, the major indices haven’t really gone anywhere since Q1 2018 and that is normal after a big rally. The bulls are back in control as long as the major indices continue trading above their respective 50 DMA lines.

Monday-Wednesday’s Action:

Stocks were closed on Monday in observance of the Labor Day Holiday. On Tuesday, stocks fell over 300 points after the Institute for Supply Management said U.S. manufacturing activity contracted in August for the first time since early 2016. The U.S. imposed 15% tariffs on a variety of Chinese goods on September 1, while China imposed new tariffs on a slew of U.S. goods. It marked the latest escalation in their long-running trade war. In other news, Wal-Mart said it will stop selling ammo after the horrific gun violence recently. Stocks rallied on Wednesday after Hong Kong stepped back and gave the protesters what they wanted letting go of certain legislation. In other news, former Fed Chairman Alan Greenspan said it’s ‘only a matter of time’ before negative rates spread to the US and he urged investors to watch the stock market carefully- because if it falls hard that will change the playing field. 

Thursday & Friday Action:

On Thursday, stocks soared after China said talks will resume in October which helped spark a huge rally. In related news, several “reliable China insiders” hinted that this round of trade talks could lead to a ‘breakthrough.’ Technically, it was bullish to see the major indices jump back above their respective 50 DMA lines. Before Friday’s open, the government said, U.S. employers added +130,000 jobs in August, missing estimates for a gain of 150,000. Unemployment remained steady at a rate of 3.7% while wages grew more than expected. Wages expanded by 0.4% on a month-over-month basis and by 3.2% year over year. Separately, Jay Powell said the Fed will continue to monitor incoming data and the ongoing trade war. Separately, Powell said the Fed is not forecasting or expecting a recession.

Market Outlook: Easy Money Is Back

Once again, global central banks showed up and juiced markets. Just recently, James Bullard, who serves as a proxy for Jay Powell, came out and gave dovish comments which also boosted markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. Earlier this year, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks hit a hiccup and that is the primary reason for the recent pressure. As always, keep your losses small and never argue with the tape.

 

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Week-In-Review: Here Are The Levels To Watch On Wall Street

Range-Bound Action Continues…For Now

After all the dust settled, the market is still range-bound as it is trading between support and resistance. One must expect this sloppy range-bound action to continue until either resistance, or support, is taken out. Until either event occurs, we have to deal with this messy action. In the short-term resistance is the 50 DMA line and the first level of support to watch are August’s lows and then the 200 DMA line. Stepping back, we closed about 6% below a record high in the S&P 500 and other popular indices, so, as long as the market stays above support, I have to expect sideways or higher prices to follow. On the other hand, if we break below support, then we will likely head lower. For now, we are long and will remain long until our stops are hit.  

Monday-Wednesday’s Action:

Stocks rallied on Monday as the major indices continued bouncing off their respective 50 DMA lines. In other news, The People’s Bank of China unveiled an interest-rate reform over the weekend aimed at stimulating economic growth The PBOC lowered borrowing costs for Chinese companies which is another form of easy money. In other news, Commerce Secretary, Wilbur Ross said the U.S. extended a license for 90 days that will allow Huawei to continue business with the U.S. companies to service existing customers.On Tuesday, the market fell as the major indices rallied into their declining 50 DMA line. Before Tuesday’s open, Home Depot gapped up over 4% after the company reported better-than-expected earnings. The home improvement giant did cut its full-year revenue outlook and warned that tariffs could hit adversely impact consumer spending. Stocks rallied nicely on Wednesday after shares of Target and Lowe’s gapped up on stronger than expected results.

Thursday & Friday Action:

Stocks opened higher on Thursday but sellers showed up after the major indices hit their respective 50 DMA lines and then pulled back. Central Bankers met in Jackson Hole for their annual meeting and the chatter suggested that the Fed may not cut rates at its September meeting. In other news, the yield curve inverted again after investors were concerned that the Fed may not step in to rescue the economy. Before Friday’s open, China announced retaliatory tariffs which sent futures lower before the open. After the open, Jay Powell spoke and reiterated he will continue to watch new developments. The bigger news came from President Trump when he lashed out against Powell and China’s President Xi. Trump also ordered U.S. companies to pull out of China. Stocks tanked after Trump’s tweet storm and erased its gains for the week. In other news, the G-7 meeting is this weekend and we will see what happens there.   

Market Outlook: Easy Money Is Back

Once again, global central banks showed up and juiced markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. Earlier this year, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks hit a hiccup and that is the primary reason for the recent pressure. As always, keep your losses small and never argue with the tape.

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Week-In-Review: Stocks End Week Lower After Bond Market Fires Recession Warning

Stocks End Week Lower After Bond Market Fires Recession Warning

It was another wild week on Wall Street as the spooky R word (recession) returned for the first time in years. On Monday, several of the big U.S. banks came out and increased the chances of a recession occurring in the near future. That was the first time we have heard about a recession in years and that spooked investors. Then on Wednesday, the bond market inverted and that typically happens before a recession. The yield on the 2-year crossed above the yield on the 10-year which is not a healthy sign. That means, if you lend money to the U.S. government for 2-years, they will pay you more than if you lend the same amount of money for 10 years.  The good news is that even with all this noise and the ongoing drama between Washington D.C. and Beijing, the S&P 500 is only 5% below its record high! In the near term important support is the 200 DMA line and near term resistance is the 50 DMA line, then 2019’s high. 

Monday-Wednesday’s Action:

Stocks fell on Monday after more negative headlines hurt sentiment. Protesters in Hong Kong caused turmoil and forced the Hong Kong International Airport to cancel all departures for the remainder of the day. A slew of big banks came out and lowered their growth forecasts after the recent increased tensions regarding the US-China trade talks. Goldman Sachs lowered its fourth-quarter growth forecast by 20 basis points to 1.8% as the firm no longer expects a trade deal before the 2020 election. Elsewhere, Bank of America raised the chance of a recession to more than 30% in the next 12 months as the firm believes many economic indicators are “flashing yellow.” Separately, Morgan Stanley believes the Fed will cut rates to zero in the near future. On Tuesday, stocks soared after the U.S. decided to delay some tariffs until December on China. Some of the items included cellphones and some clothing. The U.S. also removed some items from the list of new tariffs outright to help remove pressure on the economy. Some people view this as Trump “blinking” and legendary short-seller, Jim Chanos, asked, “Tell me why Xi should not continue to wait out The World’s Greatest Negotiator, who keeps ‘dealing’ with himself?” On Wednesday, stocks tanked over 800 points in the worst day of the year after the bond market flashed a recession warning. The bond market inverted which means the yield on the 2- year note crossed above the 10 year which usually signals a recession.

Thursday & Friday Action:

Stocks rebounded slightly on Thursday after China said that it would not fire back. In other news, Retail sales rose last month and beat the Street’s estimate. In other news, Walmart gapped up after the retail giant reported better-than-expected earnings and raised its outlook for the full year. Walmart saw growth in its core domestic business as well as online, marking the 20th consecutive quarter of sales gains in the U.S. Stocks rallied on Friday as bond yields retraced some of the recent move. 

Market Outlook: Easy Money Is Back

Once again, global central banks showed up and juiced markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. Earlier this year, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks hit a hiccup and that is the primary reason for the recent pressure. As always, keep your losses small and never argue with the tape.

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