It was another volatile week on Wall Street as investors digested a slew of economic and earnings data. Apple was the big standout winner last week as the stock shot up to new highs after reporting earnings and legendary investor Warren Buffet announced he was increasing his position in the stock.
In other news, the bulls were happy after The Federal Reserve did not raise rates last week. Finally, the week ended on a positive note when the unemployment rate fell to only +3.9% which is the lowest rate since 2000. Remember, the stock market topped out in March 2000, so just some food for thought was we start seeing strong data in the weeks and months ahead. Remember, its not the news that counts, but how the market reacts to the news.
For investors, the most important event that happened last week was that the bulls showed up and defended the longer-term 200 DMA line which is near term support. It is also encouraging to see the Russell 2000 and the Nasdaq composite both get above their respective 50 DMA lines which has served as near term resistance in recent weeks. Going forward, as long as the 200 DMA line is defended we will likely rally nicely from here.
A CLOSER LOOK AT WHAT HAPPENED LAST WEEK…
Stocks were slightly lower on Monday which was the last trading day of April. Since the beginning of earnings season, the market is up only 1% which pales in comparison to 20% gains on the earnings front. Telecom stocks fell after news broke on Sunday that T-Mobile agreed to buy Sprint for $26.5 billion. A lot of people were concerned that the deal would be blocked by the government. Technically, the market hit a wall near the 50 DMA line and began pulling back.
Stocks ended mixed on Tuesday as investors waited for Apple to report earnings after the close. The Dow and the benchmark S&P 500 ended lower while the tech-heavy Nasdaq ended slightly higher. The Dow fell over 150 points on Wednesday after the Fed held rates steady but said inflation remains a concern. Remember, the Fed has a dual mandate, help the economy grow (jobs) and keep inflation under control. So, market participants are worried that if inflation picks up, the Fed will need to raise rates more aggressively which may hurt the market and the broader economy. Even though the market ended lower on Wed, Apple rallied.
Thur & Fri Action:
On Thursday, the Dow erased a 400 point loss as investors digested a slew of earnings data and the bulls showed up and defended the 200 DMA line. Overnight, the big news came from Elon Musk when he told analysts that they are “boring” and instead spent a lot of time answering “crowd-sourced” questions from a 25 year old YouTube personality. That was bizarre and the stock fell sharply on Thursday at the open.
Stocks were quiet on Friday as investors digested the latest jobs report. Stocks rallied nicely on Friday as investors cheered the latest round of earnings and the monthly jobs report. Before Friday’s open, the Labor Department said U.S. employers added 164k, missing estimates for 191k. The big news came when the unemployment rate fell to only +3.9%, which was the lowest reading since 2000.
Market Outlook: Bulls Are Fighting
The market is trading between important resistance (2018’s high) and important support (February’s low). Until either level is broken, I have to expect this sloppy, sideways action to continue. On the downside, the big level of support to watch is February’s low and the 200 DMA line. For now, as long as those levels hold, the longer-term uptrend remains intact. Conversely, if those levels break, look out below. On the upside, resistance is now 2018’s high. As always, keep your losses small and never argue with the tape.