Week In Review- Stocks Soar To Fresh Highs; Russian Tensions Linger

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SPX- 03.07.14 broke out of a head and shoulders continuation pattern

STOCK MARKET COMMENTARY:
FRIDAY, March 07, 2014

The benchmark S&P 500 (SPX) surged to another record high last week which illustrates how strong the bulls are right now. In the past 5 weeks, from the Feb 5th low of 1737, the S&P 500 jumped a very impressive 8.4%. Remember, in a normal (non QE) world, a 10% move for the entire year would be considered healthy. So +8.4% in 5 weeks is very powerful and speaks to how strong the bulls are right now.  Remember markets do not go straight up so be careful chasing stocks that have already had big moves up here.  A better approach that has worked very well for us over the years is to buy weakness in uptrends, not just strength. In the short term, the market is clearly getting extended and a light volume pullback into the 50 dma line would do wonders to shake out the late-longs. Meanwhile, the intermediate and long term outlook remains very strong.

MON-WED’S ACTION: STOCKS Surge to New Highs

Over the first weekend in March, Russia invaded Ukraine and stocks gapped down on Monday. Fear was elevated, rumors were flying that Putin would become the next Hitler, this would become Obama’s Bay of Pigs, etc..etc. As a testament to how strong the bulls are right now, the sell-off lasted less than one day. Cooler heads prevailed and Putin pulled back by the end of the day. John Kerry landed in Ukraine on Tuesday and fear subsided very quickly. After the one day sell-off, the bulls returned and sent stocks soaring on Tuesday, helping it become the strongest day of the year. A slew of high beta stocks soared as well after a very brief and healthy pullback. The broad gains sent several key indices soaring to fresh highs and/or 2014 highs which is very encouraging.

Stocks were quiet on Wednesday as investors digested the recent and robust rally. The latest economic data was mixed to slightly lower. The Fed’s Beige Book confirmed that the harsh weather caused a slowdown in economic activity across much of the country. Elsewhere, the ADP said US employers added 139k new jobs in February, missing estimates for a gain of 160k. The ISM service index also missed estimates and the miss was written off due to – you guess it- weather. A slew of financial stocks soared as capital began to flow back into this area.

THURS & FRI’S ACTION: Bulls Are In Control

Stocks opened higher on Thursday after the ECB held rates steady and fear around the situation in Ukraine continued to ease. Crimea’s parliament, the Russian-heavy region in Ukraine, voted to join Russia and scheduled a referendum for March 16 on the move. Before Friday’s open, the Labor Department said US employers added 175k new jobs last month. This beat estimates and January’s reading was revised up to 129k. Separately, the unemployment rate unexpectedly rose to 6.7 percent.

MARKET OUTLOOK: STRONG UPTREND

The market is following our script perfectly. In late Jan/early Feb we wrote saying that this appears to be another normal (and healthy) pullback within a broader uptrend. That is exactly what occurred.  As always, keep your losses small and never argue with the tape.

Stock Market Week & Month In Review: Stocks Surge In February

SPX - 2.28.14 Head & Shoulders Head & Shoulders Continuation Pattern

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STOCK MARKET COMMENTARY:
FRIDAY, FEBRUARY 28, 2014

The benchmark S&P 500 (SPX) jumped to a fresh record high on Friday and broke out of an inverse Head & Shoulders continuation pattern (shown above). This is very healthy action considering how weak it was acting in late January. For the month, the SPX soared +4.3% and a whopping 7.5% from Feb’s low (1737)! For the year, the SPX is now up +0.59%. Remember, in a normal (non QE) world, a 10% move for the entire year would be considered healthy. So +7.5% in less than a month is very impressive and speaks to how strong the bulls are right now.  Remember markets do not go straight up so be careful chasing stocks that have already had big moves up here.  A better approach that has worked very well for us over the years is to buy weakness in uptrends, not just strength. In the short term, the market is clearly getting extended and a light volume pullback into the 50 dma line would do wonders to shake out the late-longs. Meanwhile, the intermediate and longer term outlook remains very strong.

Mon-Wed’s Action: Stocks Trade Just Below Resistance (1850)

On Monday, the benchmark S&P 500 briefly turned positive for the year when it jumped to a fresh record high before pulling back and closing below 1850 (resistance for 2014). Stocks slid in the afternoon and the SPX closed below 1850 level. M&A news picked up when RF Micro Devices (RFMD) agreed to acquire TriQuint Semiconductor (TQNT) for about $1.6 billion. Men’s Wearhouse (MW) increased its cash tender offer for Jos. A. Bank Clothiers (JOSB). Interestingly, all four stocks gapped up on the news. Elsewhere, shares of Pfizer (PFE) rose after a study involving 85,000 people showed Prevenar 13, the company’s blockbuster vaccine against childhood infections, prevented community-acquired pneumonia in people 65 and older. Shares of Humana (HUM) surged after the health insurer said the government’s proposed cuts to Medicare will be less than expectations. eBay (EBAY) rose after billionaire investor Carl Icahn accused the company of sloppy corporate governance and reiterated his call for the spin-off PayPal. Netflix (NFLX), another Icahn darling, rallied after the company agreed to pay Comcast (CMCSA) for quicker streaming speeds.
Stocks were relatively quiet on Tuesday as investors digested the latest round of economic data. The S&P/Case Shiller composite index of 20 metro areas rose +0.8% on a seasonally adjusted basis. The report showed that US home prices rose at a slower than expected pace in Dec 2013. The S&P/Case-Shiller index of property values in 20 cities rose +13.4% compared to Dec 2012. It was the first deceleration since June 2013. Consumer confidence slid in the US, the conference board said consumer confidence slid to 78.1 in February from 79.4 in January, missing estimates for 80.  Stocks were quiet on Wednesday as the market remained perched below the closely watched 1850 level. The market drifted lower in the afternoon but the bulls showed up and impressively sent stocks higher into the close.

Thurs & Fri’s Action: Bulls Send Stocks To New Highs

Stocks rallied on Thursday as investors digested a slew of economic data and the latest chatter from several Fed officials. The SPX closed above 1850 which was very encouraging considering earlier weakness and negative headlines from Russia/Ukraine. Weekly jobless claims rose by 14k to 348k, topping estimates. The Commerce Department said durable goods rose by 1.1% which was the largest increase since May and bodes well for both Main Street and Wall Street. In other news, Janet Yellen testified on Capitol Hill. The new Fed Chair said the weather remains a factor and made it clear that the Fed is ready to step in (if the economy needs more help). This helped allay investor woes that the Fed will leave the economy hanging. Stocks surged on Friday sending the SPX to a fresh record high which paved the way for a very strong week and month.

MARKET OUTLOOK: Strong Uptrend

The market is following our script perfectly. In late Jan/early Feb we wrote saying that this appears to be another normal (and healthy) pullback within a broader uptrend. That is exactly what occurred.  As always, keep your losses small and never argue with the tape.

Week In Review: SPX Snaps 2 Week Win Streak; Closes Just Below Record High

SPX- Perched Below Resistance 2.24.14STOCK MARKET COMMENTARY:
FRIDAY, FEBRUARY 21, 2014

The market continues acting great considering how weak it was acting just a few weeks ago. The benchmark S&P 500 closed on Friday within a fraction of a percent below its record high (which is very healthy). Meanwhile, it was very healthy to see the Nasdaq, Nasdaq 100, Philly Semiconductor index ($SOX), and Mid Cap indices ($MDY) all hit fresh 2014 highs. So far, the action continues to support our bullish thesis that this was just another pullback within a broader uptrend. The short, intermediate, and longer term action still remain very healthy as the market simply paused to digest last year’s very strong gain. Furthermore, the bullish fundamental backdrop is still in place for stocks. Keep in mind the US economy is the largest it has ever been in history and is still growing (albeit slower than Wall Street wants). The bulls are looking for two possible scenarios to occur: 1. The economy grows organically or 2. The Fed continues (or increases) QE to help the economy grow. Barring some unforeseen negative event, both scenarios are bullish for stocks.

Mon-Wed’s Action: Valuations Still Within Reason

In the US, stocks were closed on Monday in observance of the President’s Day holiday. Over the weekend, the headline/lead story in Barron’s suggested 4% GDP growth for 2014. If that occurs, it would justify higher prices for stocks (that is a big “IF”). Even if it is less than 4%, valuations are still not horribly extended when compared to prior significant market tops. Right now, the S&P 500’s P/E is just over 17. In 1987, and in 2007, it was near 22. In 2000, it was over 29! Bottom line, we are moving in that direction but are not there just yet. Of course, this secondary as price action always comes first in our book.
On Tuesday, stocks opened mixed as traders returned from the long weekend. It is normal to see the market pause for a little to digest its recent (and robust) rally. Since the Feb 5 1737 low, the S&P 500 soared over 6% (>100) points and definitely deserves a breather up here.  Before Tuesday’s open, the Empire State manufacturing report missed estimates. Keep in mind over the next few weeks, we will likely see a flurry of weaker than expected economic data and much of it will be written off due to the weather. On Wednesday, stocks negatively reversed (opened higher but closed lower) as the market digested its latest and steep rally off the lows. Typically, a negative reversal- after an almost vertical rally- would signal a near term decline would follow. The decline lasted 1hr early Wednesday morning before the bulls showed up and quelled the bearish pressure. This illustrates how strong the bulls are right now. The S&P 500 futures were up for 11 days in a row and the $SOX (Philly Semiconductor index) rallied for 10 straight days. Additionally, by Friday’s close, the $SOX broke out of a very long 12 year base and hit its highest level since 2002!

Thurs-Fri’s Action: Stocks Are Strong

Stocks opened lower on Thursday but the bulls quickly showed up and promptly quelled the bearish pressure and sent stocks higher by the close. Shares of Facebook (FB) opened lower after the social media giant said they will acquire WhatsAPP for $19B but closed higher as buyers stepped up and sent prices to fresh record highs. Elsewhere, shares of Tesla (TSLA) soared to a new record high after the company smashed estimates. Stocks fell on Friday as a slew of options expired (caused the heavy volume).

Market Outlook: Uptrend Intact

The market is following our script perfectly. In late Jan/early Feb we wrote saying that this appears to be another normal (and healthy) pullback within a broader uptrend. That is exactly what occurred.  As always, keep your losses small and never argue with the tape.

Second Weekly Gain On Wall Street

SPX- OverboughtSTOCK MARKET COMMENTARY:
FRIDAY, February 14, 2014

The market continues acting great considering how weak it was acting at the end of January. The benchmark S&P 500 is 0.6% below its record high which is very impressive. So far, this market continues to support our thesis that this is just another pullback within a broader uptrend. We would like to see the market sit for a while (to consolidate its recent rally off the Feb 5th 1737 low) but would not be surprised if it jumps into new high ground (because no one thinks it will). At its lowest point, the S&P 500 only fell 6.1% from its record high which is a blip on the radar when you step back and look at the bigger picture. The short, intermediate and longer term action still remains very healthy as the market simply paused to digest last year’s very strong gain. Furthermore, the bullish fundamental backdrop is still in place for stocks. The bulls are looking for two possible scenarios to occur: 1. The economy grows organically or 2. The Fed continues (or increases) QE to help the economy grow. Both scenarios are bullish for stocks in the longer term. The biggest concern is what happens when the law of diminishing returns kicks in and all the Fed printing doesn’t help Main St or Wall St anymore? My answer is to align ourselves with what is actually happening (we are in a bull market) and if and when that occurs- we’ll cross that bridge when we get there. Meanwhile, the short, intermediate and long term outlook remains very bullish as the major averages trade at/near new highs.

Monday-Wednesday’s Action: Buyers Are Strong

The major averages cautiously edged higher on Monday as investors waited to hear from the newly elected Fed Chair, Janet Yellen. Shares of Yelp (YELP) surged after the WSJ reported that Yahoo (YHOO) would include Yelp’s ratings of local businesses in its search results. Elsewhere, Mr. Icahn stepped back and publicly said he will not push AAPL to continue its share buyback program after other large investors told him to back off (by not supporting his argument).

Stocks surged on Tuesday after the Yellanator (1st to coin that term- let’s see if it sticks) testified on the Hill. This was Yellen’s first testimony on the Hill as Fed Chair. The best way to summarize her always exciting testimony: Print, Baby, Print. The stock market reacted very well to her comments as she helped allay any concerns that the Fed will turn its back on the economy. In her prepared remarks before the House Financial Services Committee, Yellen stressed continuity in monetary policy and said the recovery in the labor market is far from finished. This helped the tech-heavy Nasdaq turn positive for the year. Stocks were mixed on Wednesday as the major averages paused to digest the recent rally off the Feb 5 (1737) low. Procter & Gamble (PG) lowered their earnings outlook which put pressure on the DJIA.

Thursday & Friday’s Action: Stocks Edge Higher

Stocks rallied on Thursday after the S&P 500 bounced almost perfectly off its 50 DMA line (very healthy). The Labor Department said weekly jobless claims rose by 8k to 339k, topping estimates for 300k. Separately, the Commerce Department said retail sales slid -0.4% in January from December, missing expectations for an unchanged reading.  Stocks rallied on Friday after the Eurozone economy grew and beat estimates. This bodes well for the global economy. In the U.S., consumer sentiment was unchanged in February at 81.2, beating the 80.6 estimate.

MARKET OUTLOOK: Uptrend Defended

The market is following our script perfectly. This turned into another normal and healthy shallow pullback within a broader uptrend.  As always, keep your losses small and never argue with the tape.

Powerful “UP” Week On Wall Street

SPX- sloppy double bottom 50 dma 2.10.14STOCK MARKET COMMENTARY:
FRIDAY, February 07, 2013

In the short term, the buyers are back in control after what appears to be another shallow pullback in size (% decline) and scope (weeks, not months). The major averages positively reversed for the week (opened lower and closed higher) which is typically a bullish sign. For weeks- we have written, “In the short term, the market is clearly extended and due for another short term shallow pullback.” That is exactly what happened. From our point of view, the intermediate and longer term action still remains very healthy. Furthermore, the bullish fundamental backdrop is still in place for stocks. The bulls are looking for two possible scenarios to occur: 1. The economy grows organically or 2. The Fed continues (or increases) QE to help the economy grow. Both scenarios are bullish for stocks in the longer term. The biggest concern is what happens when the law of diminishing returns kicks in and all the Fed printing doesn’t help Main St or Wall St anymore? My answer is to align ourselves with what is actually happening and if and when that occurs- we’ll cross that bridge when we get there. Meanwhile, the intermediate and long term outlook remain very bullish as the major averages.

MONDAY-WEDNESDAY’S ACTION: Buyers Regain Control

The market fell hard on Monday sending the major averages below critical levels of support after a key US manufacturing report missed estimates. The benchmark S&P 500 broke below support 1767 (which has been support since December). In addition, the Dow Jones Industrial Average broke support and also broke below its 200 DMA line. Since September 2012 (when Q3 began), there has been a very strong correlation between the U.S. stock market and Japan’s stock market. The primary reason is because the U.S. & Japanese Central Banks are the two most aggressive central banks (i.e. printing the most money) in the developed world. Earlier today, the Nikkei fell 10% from its 2013 high and is now officially in “correction” territory, even as Japan’s central bank continues to print billions of dollars everyday. Keep in mind a 10% decline in the S&P 500 would be 1665.

Stocks bounced on Tuesday after economic data stabilized. Factory orders slid by -1.5%, beating estimates for a decline of -1.8%.  Retailer Michael Kors (KORS) experienced a huge break-away gap after reporting earnings. Wednesday marked a near term low for stocks as buyers showed up, defended the 150 DMA line (~30 WMA) and regained control of this market. The market tried to hit a new low but buyers quickly showed up and quelled the bearish pressure which set the stage for a strong rally over the next few days. Stocks were quiet after the latest round of economic data was released. Before the open, ADP, the country’s largest private payrolls company, said US employers added 175k jobs in January which just missed estimates of 180k. Separately, the ISM service index came in at 54.0 in January, beating estimates.

THURSDAY & FRIDAY’S ACTION: Stocks Rally After Jobs Report

Stocks rallied sharply on Thursday and Friday as fear eased about a global slowdown. On Thursday, briefing reported that: “Yen weakness also factored into the advance as the retreat of the Japanese currency calmed fears about some participants being forced out of yen-based carry trades due to strength in the funding currency. The dollar/yen pair ended the New York session right above 102.00 after starting the day near 101.20.” Before Friday’s open, the Labor Department said US employers added 113k jobs in January, missing estimates of 185k. Meanwhile, the unemployment rate slid to 6.6%, beating estimates for 6.7%.

MARKET OUTLOOK: Uptrend Defended

So far this appears to be another normal shallow pullback within a broader uptrend.  As always, keep your losses small and never argue with the tape.

 
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