2016.10.293129

Week-In-Review: Stocks Hit All-Time Highs On More Easy Money

Stocks Hit New Highs On More Easy Money From Global Central Banks

The S&P 500 hit a fresh record high last week after global central banks pushed for more easy money. The Dow Jones Industrial Average, Nasdaq Composite, Nasdaq 100, and small-cap Russell 2000 index are all trading just below their record highs. The big take-away from last week is that easy money is here to stay which is a major driver of global equity markets. The U.S. Fed, European Central Bank (ECB) and a few other central banks all signaled more easy money is ready, if needed. Once again, in the short-term, the market is extended to the upside and due to pullback. The bulls want to see the 50 DMA line serve as support and will welcome a nice short-term pullback to consolidate the recent 3-week very strong Fed-induced rally. 

Monday-Wednesday’s Action:

Stocks edged higher as investors waited for another busy week from global central banks. The Fed hinted that it would cut rates and investors want to see what the Fed does when it ends its 2-day meeting on Wednesday. In other news, trade tensions are still lingering after Commerce Secretary Wilbur Ross said Monday that President Donald Trump is “perfectly happy ” to slap further tariffs on Chinese imports if the two countries cannot reach a deal. In other news, India announced new retaliatory trade tariffs against the US. The move came after Washington did not exempt Delhi from higher taxes on steel and aluminum imports. Stocks soared on Tuesday after Mario Draghi, head of the European Central Bank (ECB), said he’s ready to print more money and announce more easy money measures, if needed. Futures soared on the news and then Trump said he will have an extended meeting with China’s President Xi Jinping at the G-20 summit next week.
Stocks edged higher on wed after the fed concluded its two day meeting & said it does not plan to cut rates, but is ready to cut, if needed.

Thursday & Friday Action:

Overnight, buyers showed up because futures were up 250 points before Thursday’s open. That paved the way for a higher open as investors digested the Fed meeting and believed that it is just a matter of time until the Fed cuts. The S&P 500 hit a fresh record high on Thursday as investors cheered the easy money stance. In other news, Crude Oil vaulted 6% after Trump said Iran made a “very big mistake.” Stocks were relatively quiet on Friday as investors digested a busy week. The three big high-fliers this week were gold, crude oil and RBOB gasoline. 

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 the Federal Reserve reversed its stance and moved back into the easy money camp. Now, other central banks have followed suit and easy money is back to being front and center for the market. As always, keep your losses small and never argue with the tape.

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Week-In-Review: Stocks End Week Higher And Flirt With Important Level

Stocks End Week Higher And Flirt With Resistance

The market rallied last week as investors cheered more easy money from global central banks and waited for next week’s Fed meeting, then the G-20 meeting at the end of the month in Japan. At the end of May the market was oversold and then bounced sharply in early June after the Fed hinted at a possible rate cut in the near future. The market rallied sharply then traded near the 50 DMA line which has served as near-term resistance for some of the major indices. The Nasdaq, Nasdaq 100, and small-cap Russell 2000 are below that important level while the Dow Jones Industrial Average and S&P 500 are trading slightly above it. The 50 DMA line is resistance for the former and has turned into support for the Dow & S&P 500. For now, the action is normal and the key going forward is to see if the 50 DMA line can turn into support for the Nasdaq and Russell. After the big rally, it would be perfectly normal to see the market pause and digest the recent move ahead of the G-20 meeting. If the market races higher, that would be very bullish. 

Monday-Wednesday’s Action:

Stocks opened higher on Monday after the U.S. and Mexico reached a deal to avoid new tariffs. Separately, President Trumps said, If China’s President Xi does not attend G-20, more China tariffs will go into effect immediately. That sent stocks slightly lower mid-day. In M&A news, Raytheon and United Technologies agreed to an all-stock merger that would create a new company with $74 billion in annual sales. In other news, Salesforce.com announced it is acquiring big data company Tableau Software on Monday. Salesforce.com will pay $15.3 billion in an all-stock deal, marking the biggest purchase in the company’s history. Tableau’s stock vaulted by nearly 40% on Monday after the deal was announced. Stocks fell on Wednesday as the market continued to struggle near resistance. Billionaire Investor Paul Tudor Jones said he expects the Fed to cut rates and that should help yields, gold and stocks rally.

Thursday & Friday Action:

On Thursday, stocks rallied as the bulls showed up to defend the 50 DMA line. Separately, oil prices jumped after two oil tankers were attacked in the Gulf of Oman. The Trump administration said Iran was behind the attacks. Oil prices jumped one day after oil hit a 5-month low. The recent drop in oil came as supply grew and concern spread that demand will decline. 

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 the Federal Reserve reversed its stance and moved back into the easy money camp. Now, other central banks have followed suit and easy money is back to being front and center for the market. As always, keep your losses small and never argue with the tape.

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Week-In-Review: Stocks Soar As Global Central Banks Push For More Easy Money

Stocks Soar As Global Central Banks Push For More Easy Money

Stocks soared last week after several major Central Banks stepped in and announced more easy money measures to help stimulate markets. The U.S. Federal Reserve sent a clear message that it is ready to cut rates, China injected $72 billion to help spur their economy, The European Central Bank (ECB), Australia’s Central Bank and a few others also came out and supported more easy money measures. For now, the most important force on the market is easy money from global central banks. Eventually, that will end but until it does, it needs to be respected. When easy money is in play, everything else takes a backseat. That was the single most important lesson in the aftermath of the 2008 financial crisis. For now, easy money trumps everything else.

Monday-Wednesday’s Action:

Stocks fell on Monday after a slew of tech stocks dragged the market lower and the Nasdaq fell into correction territory. Over the weekend, the Justice Department went after Alphabet (Google’s parent company) and then on Monday it went after Apple. The Justice Department said it has jurisdiction over a potential antitrust probe against Apple. Shares of other tech giants fell in sympathy. Separately, Fed’s Bullard said a rate cut may be ‘warranted soon.’ That is the Fed put in action. Stocks soared on Tuesday after the Fed signaled it will help the economy, if needed. Stocks soared after Fed Chairman Jerome Powell signaled the central bank would be open to easing monetary policy to save the economy, if needed. The move came one day after the Nasdaq officially fell into correction territory. This is also known as the Fed Put (the idea that the Fed would step in an announce more easy money if stocks fall). Stocks continued to race higher on Wednesday after a private jobs number came in weaker than expected. The weaker than expected reading prompted many to hope that the Fed will cut rates, if needed. After the close, the latest talks between Mexico and the U.S. ended without a deal.

Thursday & Friday Action:

Stock were quiet on Thursday as the market paused to digest the recent and robust rally. The ECB hinted more easy money is around, if needed. Separately, Trump said tariffs on China could be raised by another $300 billion, if necessary. In other news, Central Banks around the world united and said more easy money is ready, if needed. On Friday, the Labor Department said U.S. employers only added 75,000 new jobs in May, missing estimates for a gain of 180,000. In other news, China’s PBOC injected $72 billion to rollover medium term funds which helped boost the market.

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 the Federal Reserve reversed its stance and moved back into the easy money camp. Now, other central banks have followed suit and easy money is back to being front and center for the market. As always, keep your losses small and never argue with the tape.

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Week-In-Review: Selling Continues Ahead of Long-Weekend As Trade Woes Linger

The market fell again last week after China said the trade talks will stop until the U.S. addresses its ‘wrong actions.’ The latest negative headline du jour aside, the market was way overdue to pullback after a strong year-long rally. For the past few weeks, the market has been living below the 50 DMA line which is not ideal in the near-term. In the short-term, the next levels of support to watch are May’s low, March’s low, the 200 DMA line and then 2018’s low. Meanwhile, the next levels of resistance to watch are the 50 DMA line and then 2019’s high. Until the 50 DMA line and or May’s low is breached, I have to expect this sloppy/sideways action to continue. If the 50 DMA line is broken, then higher prices will follow. Alternatively, if May’s low is breached, then lower prices will likely follow.

Monday-Wednesday’s Action:

Stocks fell on Monday after Google decided to cut ties with Huawei. That move sent a slew of semiconductor stocks lower as more and more companies will cut ties with Huawei. The move came after President Donald Trump’s administration added Huawei to a list that requires U.S. companies to get a license before doing business with these companies. Elsewhere, Bloomberg News reported that companies like Intel, Qualcomm and Broadcom will stop supplying Huawei until further notice. On Tuesday, stocks rebounded after the U.S. eased restrictions on Huawei. In other news, a few retailers reported earnings and the results were mostly negative. Shares of Kohl’s tanked 12.4% after the company reported weaker-than-expected earnings and shares of J.C. Penney plunged 7.4% after reporting its numbers. On Wednesday, the market fell after China said it has to “rethink economic ties with the U.S.” and the Federal Reserve released the minutes of its latest meeting. The Fed said it will not be raising rates anytime soon, even if the economy strengths. The market still fell on the day.

Thursday & Friday Action:

On Thursday, stocks fell after China said trade talks can’t continue until the U.S. addresses its ‘wrong actions.’ That spooked the market and sent futures down 250 points before the open. The market enjoyed an impressive rally for most of this year thanks in part to two major points: the Fed would shift back to an easy money stance and the U.S. China trade spat will be resolved. The former occurred and for the past few weeks the second is in limbo. In other news, IHS Markit said U.S. manufacturing activity slid to a nine-year low. Stocks were slightly higher on Friday after Trump said Huawei could be included in a trade deal with China and that a trade deal could be reached very soon. Separately, U.S. durable goods fell -2.1% last month as exports swelled and inventories rose. In other news, Theresa May resigned as Prime Minister as Brexit pressure continues to rise. 

Market Outlook: Sideways Action

Stepping back, the market is pulling back as trade woes continue to hurt stocks. 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 the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is the 50 DMA line then the recent high while near-term support is May’s low, March 2019’s low, the 200 DMA line and then 2018’s low. As always, keep your losses small and never argue with the tape.

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Week-In-Review: Transitory Fed, Sparks Transitory Pullback

Transitory Fed, Sparks Transitory Pullback

The market remains very strong as it refuses to pullback in a meaningful fashion. Investors digested a slew of earnings, economic data and the latest Fed data last week. The big headline came on Wednesday when Jay Powell did not cut rates. Instead, he said that the current state of low inflation is transitory. That word sent stocks lower because many people were expecting the Fed to cut rates later this year. Once again, the pullback did not last long as buyers showed up Friday morning and sent stocks higher. The fact that the market refuses to fall clearly shows us how strong the market is right now. Additionally, the inability to fall strengths the case for a melt-up before the market eventually tops out.

Monday-Wednesday’s Action:

Stocks were quiet on Monday as investors waited for a slew of earnings and economic data to be released later this week. So far, over 230 companies in the S&P 500 have reported quarterly results and close to 80% have beat estimates according to data from FactSet. Stocks opened lower on Tuesday after shares of Alphabet fell more than 8% after reporting earnings. Alphabet had its worst day since Dec. 1, 2008 after posting revenue of $36.34 billion in the first quarter, missing estimates of $37.33 billion. The company said the weaker revenue was due to changes in YouTube’s algorithm to help filter out negative content. After Tuesday’s close Apple reported earnings and the stock rallied on the news. On Wednesday, the market opened higher but closed lower. Before the open ADP and Moody’s Analytics said private payrolls rose by 275,000 in April, easily beating the Street’s estimate for 177,000. In the afternoon, the Fed held rates steady and said it does not plan on cutting rates anytime soon when it said the current inflation is transitory. That word sent stocks lower because many people were expecting the Fed to cut rates later this year.

Thursday & Friday Action:

The market fell on Thursday after House Speaker Nancy Pelosi, accused Attorney General William Bar, of lying to Congress. Clearly, that is not a light statement and that could spark more partisan infighting which could hurt the market if it gets worse. Before Friday’s open, the Labor Department said US employers added +263,000 new jobs last month while the unemployment rate fell to 3.6%. That was the lowest unemployment rate since December 1969. Meanwhile, the report easily beat the Street’s estimate of 190,000 and a 3.8% jobless rate. The strong rally on Friday erased most of earlier decline. 

Market Outlook: Bullish Tailwind Continues

The market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is 2018’s high while near-term support is March 2019’s low, then the 200 and 50 DMA lines, and then 2018’s low. As always, keep your losses small and never argue with the tape.

 

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