Week-In-Review: Stocks Tank On Final Week Before Election

spx-200-dma-line-supportThe Tape Is Weak

In a normal, non easy money world, we would say the market is tracing out a classic topping pattern and the days are numbered for this bull market. Last week we saw several major global central banks become “less dovish.” That doesn’t mean they won’t announce more easy money if markets fall, just right now, they are trying to move away from their ultra-easy money stance. For us, that is the “big” story that very few people are talking about and the primary reason why markets are falling, not the election. Here are the facts, stocks are getting weaker as we enter the final weekend before the election. This was the 9th consecutive week that the S&P 500 and Dow Jones Industrial average closed below their respective 50 DMA lines. The S&P 500 and the Russell 2000 are trying to bounce off their longer term 200 DMA lines – an area we highlighted for you in recent weeks as the next level of support to watch. In the short term, the market is very oversold and way overdue to bounce as we head into the election. There has been a lot of “damage” over the past few weeks as several important leaders broke down after reporting earnings. Most notably: Facebook ($FB), Amazon ($AMZN), & Alphabet (GOOGL) and Alibaba ($BABA) are now broken leaders as they all fell below important areas of support (50 DMA line) after reporting earnings. Google and Alibaba intially rallied after reporting numbers but sellers quickly showed up which illustrates how weak the market is right now. Additionally, the number of stocks in strong technical shape continues to dwindle which bodes poorly for the market. We do want to note that, since February, whenever the market looks weak, the bullish pixie dust shows up and the major indices rip higher. Since Sep 9th, the bullish pixie dust has not been as strong. Additionally, more and more sectors are rolling over with leadership continuing to narrow. As we have been saying since early September, a strong defensive stance is paramount at this juncture. 

Mon-Wed Action:

Stocks were quiet on Monday which was the last trading day of October. All the major averages ended lower in October with the S&P 500 and Dow Jones Industrial Average experiencing their third straight monthly decline. News was relatively quiet as investors continued to digest the latest round of mixed earnings data and continued watching the ongoing drama around the election. Since Friday’s FBI announcement, Clinton’s lead over Trump narrowed significantly as the election season enters its final week. Baker Hughes (BHI) merged with General Electric (GE) and October was the biggest M&A month on record. According to the latest data, around $337 billion in M&A news was announced, easily surpassing the previous high of $282.2 billion from January 2000. Companies are rushing to close deals before the Fed raises rates. Elsewhere, crude oil fell over 3% after rumors spread over the weekend that OPEC will not reach a deal to cut production at its November meeting.

Stocks fell on Tuesday causing the S&P 500 to slice below major support (Sep’s low of 2119 & Oct’s low of 2114). It also briefly broke below the psychologically important 2,100 level before buyers showed up in the afternoon. There is a lot of technical damage in the major indices. Over night, three major central banks (Japan, Australia and Canada) concluded their latest meetings without announcing more easy money. The “less dovish” stance worried some investors especially as the Fed wants to tighten in the near future. Economic data was mixed. The Markit manufacturing PMI came in at 53.4, above September’s number of 51.5. Meanwhile, the ISM manufacturing index matched expectations at 51.9, while construction spending data for September missed estimates.

Stocks opened lower on Wednesday after the latest round of mostly disappointing earnings and economic data was announced. A handful of well-known stocks gapped down after reporting earnings which is not good for the market. FLT, PXD, ADPT, PAYC, DXCM, CERN, DATA, ZEN, PLT, MTCH, & HLF were some of the stocks to fall on earnings. Alibaba (BABA) opened higher but quickly turned lower which is not a healthy sign for the market or leading stocks. Economic news was less than stellar. ADP, the country’s largest private payrolls company, said the U.S. economy only created 147,000 new jobs last month, missing estimates for 170,000. The Fed held rates steady for the 7th straight time and said the case was getting stronger for rate hike in December. Elsewhere, oil prices plunged after inventory levels jumped to the highest level in its 34 year history.

Thur & Fri Action:

Stocks opened higher but quickly gave up the gains and spent most of the day near unchanged as sellers remained in control. Overnight, two major central banks moved away from an ultra-easy money stance. The Bank of England and China’s Central Bank both said they will not do more to stimulate markets right now. Instead, China’s Central Bank said it wants to take measure to cut the froth out of the system. In the U.S., economic data was mixed. initial jobless claims rose to 265,000, weaker than the Street’s 258,000 estimate. Elsewhere, third-quarter productivity increased by 3.1%, well above the expected rise of 2%. The ISM non-manufacturing index missed estimates last month while factory orders rose for a third straight month and topped estimates. Earnings reactions continued to awful: Facebook ($FB), FitBit ($FIT), Shopify (SHOP), Godaddy (GDDY) were among some of the big losers on Thursday. Charter communications (CHTR) gapped up at the open but immediately sold off and closed lower. Before Friday’s open, the Labor Department said U.S. employers added 161k new jobs, missing estimates for 175k. The S&P 500 and Russell 2000 tried to bounce off their longer term 200 DMA lines.

Market Outlook: Tape Is Getting Weaker

The tape remains continues to deteriorate. The fundamental driver continues to be easy money from global central banks but the law of diminishing returns may be setting in. Additionally, several big central banks are becoming “less dovish” which may bode poorly for stocks. Economic and earnings data remain mixed at best which means easy money is here to stay. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today if you want to talk to Adam about your portfolio. Visit: 50Park.com

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Week-In-Review: The Market Is Getting Weaker, Not Stronger

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The Tape Is Getting Weaker

The tape remains very split but is getting weaker. This was the 8th consecutive week that the S&P 500 and Dow Jones Industrial average closed below their respective 50 DMA lines. More worrisome for the bulls, the Russell 2000 broke below the neckline of a big double top pattern (see annotated chart on page 2 below). Meanwhile, the Nasdaq and Nasdaq 100, which were fighting to stay above that important area of support, broke and closed below it last week. The next level of important support to watch is October’s low. If that level breaks the next level to watch is the longer term 200 DMA line for the major indices. We do want to note that, since February, whenever the market looks weak, the bullish pixie dust shows up and the major indices rip higher. Since Sep 9th, the bullish pixie dust has not been as strong. Additionally, more and more sectors are rolling over with leadership continuing to narrow. Semiconductors are strong and so are some big cap tech stocks. Amazon, a strong leader in 2016, gapped down after reporting earnings on Friday – another leader to bite the dust. So far, breakouts have been few and far between with fewer and fewer new areas emerging in a clear leadership position. Additionally, earnings are not great and economic data is not exciting. GDP came in at 2.9% on Friday, beating estimates for 2.5%. Barring a huge sell off, the Fed will likely raise rates in December. The only way that will change is if Hillary surges in the polls before the Fed meeting this Wednesday – which is doubtful considering she gapped down after the latest FBI announcement. Now that Hillary gapped down, we expect the Fed to kick the can until December and blame the “data.” Of course, if Oct’s lows are breached, the bullish case will be over in the short term. On the other hand, resistance is the 50 DMA line and then 2016’s high for the major indices. A strong defensive stance is paramount at this juncture.  

Mon-Wed Action:

Stocks rallied on Monday as investors digested the latest round of mixed earnings data and another mega-merger between AT&T & Time Warner. Over the weekend, AT&T (T) reached a deal to acquire Time Warner (TWC) for more than $85 billion, or $107.50 per share. The deal is made possible by easy money from the Fed and other central banks and will likely face a lot of regulatory scrutiny. In other news, shares of T-Mobile (TMUS) surged after the company reported earnings. Elsewhere, oil prices fell after Iraq said it would not join OPEC in cutting production. This put pressure on a slew of energy stocks.

Stocks slid on Tuesday as investors digested a slew of earnings data. Consumer stocks fell hard, especially stocks that depend on people buying things for their home after reporting disappointing earnings. Sherwin-Williams (SHW), Whirlpool (WHR) and Masco (MAS), were some of the stocks that fell hard on Tuesday. On the economic front, consumer confidence came in at 98.6, missing the Street’s forecast of 101.5. Meanwhile, U.S. home prices edged higher in August from July, with the S&P CoreLogic Case-Shiller 20-City Composite index rising by 5.1% year over year. The major indices continue going nowhere fast as investors wait for more earnings and economic data. Stocks opened lower on Wednesday after Apple Inc (AAPL) gapped down after reporting earnings. A slew of other stocks reported earnings as well and, so far, there is a slight bias to the downside. Meaning, more stocks are falling, after reporting earnings, than rallying. Stocks turned higher after oil prices reversed on a report that showed supply tightened slightly. Economic data was mixed. Mortgage applications slid -4.1% last week, even though mortgage rates slid. The October services PMI index rose to 54.8 higher than the last reading of 52.3. Meanwhile, new home sales rose by 3.1% to 593k last month. The Fed’s will end its next meeting on Wednesday Nov 2nd.

Thur & Fri Action:

Stocks opened higher but closed lower on Thursday as investors digested the latest round of economic and earnings data. It was another busy day for earnings with shares of Service Now (NOW), Twitter (TWTR) and Tesla (TSLA) among the companies that rallied after reporting numbers while shares of Lending Tree (TREE), O’Reilly Automotive Inc (ORLY, and GNC (GNC) fell after reporting earnings. Economic data was also mixed. Before the open, Durable Goods fell -0.1%, missing estimates for +0.2%. Jobless claims came in at 258k, compared to the Street’s estimate for 255k. Meanwhile, Pending Home Sales grew by +1.5%, beating estimates for +1.0%. Elsewhere, sovereign bonds fell around the globe. After Thursday’s close Amazon (AMZN) gapped down after reporting earnings while Alphabet (Google) edged higher. Before Friday’s open, the government said GDP rose by 2.9% in Q3, beating estimates for 2.5%. Stocks opened higher but sold off after the FBI said new emails surfaced in the Hillary investigation.

Market Outlook: Tape Is Getting Weaker

The tape remains very split but weakened considerably in recent weeks. The fundamental driver continues to be easy money from global central banks but the law of diminishing returns may be setting in. Economic and earnings data remain mixed at best which means easy money is here to stay. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today if you want to talk to Adam about your portfolio. Visit: 50Park.com

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Week-In-Review: Market Remains Split; 7th Weekly Close Below Support

11spx-adfa7th Weekly Close Below Important Support

The tape remains very split. This is the 7th consecutive week that the S&P 500 and Dow Jones Industrial average are below their respective 50 DMA lines. Major support is October’s low and if that level breaks the next level to watch is the longer term 200 DMA line. The Nasdaq 100, on a relatively basis, is acting better. More and more sectors are rolling over with clear leadership in the semiconductor group and other tech stocks. So far, earnings season remains mixed at best with a clear majority of stocks (and the major indices) are down since earnings season began. Our longstanding clients know that every earnings season we keep a list of “strong” and “weak” performing stocks after earnings and the “weak” list greatly outnumbers the “strong” list. We are still in the early part of earnings season so anything could change but until buyers show up- defense is king. 

Mon-Wed Action:

On Monday, stocks were mostly lower as investors digested the latest round of economic and earnings data. Before the open, Bank of America (BAC) reported earnings and beat estimates but the stock didn’t rally. Around mid-day, Fed Vice Chair Stanley Fischer warned investors that if rates stay low for a long time it could lead to a deeper recession and make the economy more vulnerable in the future. Economic data was weak. The Empire State Manufacturing survey fell to -6.8, missing estimates for 1.0. Elsewhere, industrial production slid to 0.1%, missing estimates for 0.2%.

Stocks rallied on Tuesday, helped by the latest round of earnings data and tame inflation data. Shares of Netflix (NFLX), Domino’s Pizza (DPZ), Goldman Sachs (GS) and United Health (UNH) all rallied nicely after reporting earnings. Meanwhile, shares of Johnson & Johnson (JNJ) and IBM (IBM) were some of the well-known stocks that fell after reporting earnings. Elsewhere, The Labor Department said its Consumer Price Index rose 0.3%, matching estimates. Meanwhile, the so-called core CPI only rose by 0.1%, missing estimates which helped allay inflation concerns.

Overnight China said its economy grew by 6.7% which was in between the government’s estimate of 6.5-7%. Stocks rallied on Wednesday, helped by a large rally in crude oil. Crude oil broke out to a 15-month high after the Energy Information Administration reported a 5.3 million draw-down in inventory. Tighter supply concerns helped crude oil breakout and hit a fresh high for the year ahead of OPEC’s meeting next month (where they are projected to cap or cut supply). Elsewhere, earnings continued to be a mixed bag while economic data failed to impress. Housing starts came in at 1.047M, missing estimates for 1.180M which put pressure on a slew of housing stocks. Finally, the Fed’s Beige Book showed moderate economy activity.

Thur & Fri Action:

Before Thursday’s open, the European Central Bank (ECB) did nothing at its latest meeting which disappointed some investors (who wanted more easy money). Economic data was mixed. Jobless claims came in at 260k, missing estimates for 250k. The Philly Fed Index came in at 9.7, beating estimates for 7.0. Existing home sales came in at 5.470M, beating estimates for 5.35M. Finally, leading economic indicators came in at 0.2% matching estimates. On Friday, stocks opened lower but erased the losses in the afternoon.  

Market Outlook: Tape Is Getting Weaker

The tape remains very split but weakened considerably in recent weeks. The fundamental driver continues to be easy money from global central banks but the law of diminishing returns may be setting in. Economic and earnings data remain mixed at best which means easy money is here to stay. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today if you want to talk to Adam about your portfolio. Visit: 50Park.com

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Week-In-Review: Stocks Smacked As Earnings Season Begins

spx-trading-rangeStocks Fall As Earnings Season Begins

Stocks fell hard last week as earnings season officially began. It was a volatile and important week because the Nasdaq 100 hit a fresh record high on Monday, then sellers showed up and sent stocks lower for the rest of the week. On Monday, the Nasdaq 100 jumped to a fresh record high as the Dow Industrial Average and the S&P 500 rallied into resistance (their respective 50 DMA lines). Then, stocks immediately sold off causing the Nasdaq 100 to negate its breakout within a few hours. Stocks fell hard on Tuesday, were quiet on Wednesday, then fell hard on Thursday causing the Dow & S&P 500 to slice below important support (September’s low) that we have highlighted for you in recent weeks. Shortly after Thursday’s open, buyers showed up and defended support by the close. This time, the breakdown was negated within a few hours and stocks rallied into the close. Stocks were quiet on Friday but closed the week in the lower to middle half of the range, which is not a bullish sign. Looking forward, important support is Thursday’s low for the major indices and then the longer term 200 day moving average. If the market can rally from here then we should expect resistance to be the 50 DMA line for the Dow & S&P 500 and then their respective 2016 high. Earnings season is now front and center and it is of the utmost important to see how the market, and individual stocks, react to earnings. Suffice it to say, the action is not healthy. 

Mon-Wed Action:

Stocks rallied on Monday as investors wait for earnings season to begin in earnest. Oil prices surged more than 3% after Russia said it was open to curbing production to support oil prices. Russian President Vladimir Putin said Russia is open to join a proposed cap on oil output by OPEC members. Investors also digested the second presidential debate as we enter the last few weeks ahead of the election. Banks and the bond market were closed on Monday in observance of the Columbus Day holiday, but the stock market was open.

Stocks fell hard on Tuesday after Alcoa ($AA) officially kicked off earnings season on a sour note. Alcoa, plunged nearly 11%, their worst day in five years, after the aluminum giant said quarterly revenue and earnings missed the market’s expectation. Elsewhere, shares of Apple ($AAPL) rallied to a 10-month high after Samsung said it would stop selling its Galaxy Note 7 smartphone due to safety concerns. Finally, shares of Illumina ($ILMN) got smacked and lost a quarter of its value after the company cut third-quarter revenue forecast for the second consecutive time.

Stocks were relatively quiet on Wednesday as investors digested Tuesday’s large sell-off and the minutes of the Fed’s latest meeting. The minutes showed the Fed remains split and wants to wait for more data but is ready to raise rates ‘relatively soon.’ In economic news, mortgage applications slid -6% last week as mortgage rates continued to edge higher. A separate report showed the number of job openings fell to 5.4 million in August. Finally, Reuters reported that the European Central Bank may discuss extending its QE program past March 2017 at future meetings. Any sign of “more” easy money is designed to help stocks.

Thur & Fri Action:

Stocks opened sharply lower on Thursday after China said exports plunged 10% overnight. China is a major exporter so the fact that exports are down 10% leads many people to question the health of the already fragile global economy. Right after the open, the Dow & S&P 500 briefly undercut important support (September’s low) before buyers showed up and helped defend that important level by the close. Stocks opened higher on Friday but closed mixed after JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all reported stronger-than-expected quarterly results. Sellers showed up shortly after the open and the market spent the rest of the day drifting lower. Janet Yellen gave a speech and said easy money is prudent whenever the economy gets in trouble. Next week, over 80 S&P stocks are scheduled to report earnings, including Bank of America, Netflix, BlackRock, Goldman Sachs, United Continental, just to name a few. For the week, stocks fell hard and are flirting with important support (Sep’s low).

Market Outlook: Tape Is Getting Weaker

The tape remains very split but weakened considerably last week. The fundamental driver continues to be easy money from global central banks but the law of diminishing returns may be setting in. Economic and earnings data remain mixed at best which means easy money is here to stay. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today if you want to talk to Adam about your portfolio. Visit: 50Park.com

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Week In Review: Next Up: Earnings Season

spx555555Next Up: Earnings Season

Stocks fell last week after the jobs report missed estimates for the second straight month and more and more areas appear to be rolling over/getting in trouble. Around mid-day on Friday, after the Dow was down a little over 100 points, Mario Draghi, head of the European Central Bank, came out juiced markets after he said the ECB is ready to expand QE (print more money), if needed. Talk about trying to manipulate markets. Imagine if a CEO gave out material information to juice her stock, she’d be in jail. Yet one cares when central bankers juice markets. The Dow Jones Industrial Average and the benchmark S&P 500 are both “living” below their respective 50 DMA lines which is not a healthy sign. Meanwhile, the Nasdaq and Nasdaq 100 are above their respective 50 DMA lines, but not by much. Furthermore, a longer term look at the market shows the major indices are stalling out up here as investors wait for the Fed to raise rates. We find it a little worrisome (bearish) to see the market give back all the post Fed gains. Additionally, Dr. Yellen came out last week and said the Fed can buy stocks and corporate bonds in the next downturn. Yet, stocks couldn’t rally. If the head of the U.S. Fed is telling the world the Fed is ready to buy stocks and bonds in the next downturn- and that’s not enough to juice markets, that tells us a lot. Bottom line, the market is not acting well right now and we want to take our time until the bulls regain control. Looking forward, we are entering earnings season and that will likely become front and center over the next few weeks. So far, even with rates kept artificially low, earnings are projected to fall for a 6th straight quarter. To be clear, if September’s lows are breached, that will be a huge negative and we will expect another leg lower to follow. On the other hand, if the Dow and S&P 500 can get (and stay) above their respective 50 DMA lines, that will be a big positive for the bulls. Until either event occurs, we have to expect this sloppy/sideways action to continue.

Mon-Wed Action:

Stocks fell on Monday on the first trading day of the month and quarter. Economic data was mixed. The PMI Manufacturing Index came in at 51.5, lower than the last reading of 52.0. The ISM Manufacturing Index came in at 51.5, beating estimates for 50.2. Finally, construction spending slid -0.7%, missing estimates for 0.3%. Meanwhile, shares of Tesla (TSLA) gapped up after a report was released that suggested the electric car company will report a solid quarter.

Stocks fell on Tuesday after a few Fed heads suggested the Fed should raise rates as soon as November. This sent the US dollar higher and gold and other interest rate sensitive areas of the market lower on the news. Utilities, REITs, and a handful of other interest-rate sensitive areas of the market fell hard as fear spread regarding an imminent Fed rate hike. Then the selling spread after the European Central Bank, hinted it may taper (reduce) QE (print less money) before their deadline.

Stocks rallied on Wednesday as investors digested the latest round of economic data. Before the open, the composite Mortgage Application index rose 2.9% vs the prior reading of -0.7%. Mortgage rates fell to the lowest level since July and the average interest rate on a 30-year fixed rate conforming loan is 3.62%. The ADP Employment Report, which measures private payrolls data, came in at 154,000, easily beating the Street’s estimate for 170,000. The PMI Service index came in at 52.3, higher than the prior reading of 51.0. Factory orders grew by 0.2%, beating the -0.2% forecast. Finally, the ISM service index came in at 57.1, beating estimates for 52.9.

Thur & Fri Action:

Stocks opened lower on Thursday but closed mixed after a few large M&A deals fell apart and Deutsche Bank cut an extra 1,000 jobs in Germany. Shares of Twitter (TWTR) plunged nearly 20% before the open after a report that some tech giants are not planning a bid to acquire the company. Shares of Twitter surged in recent weeks on hopes the company will be acquired. Separately, KLA-Tencor (KLAC) & Lam Research (LRCX) canceled their planned $10.6 billion merger because the the Justice Department may oppose the deal on antitrust grounds. Weekly jobless claims came in at 249k, easily beating estimates for 256k. That strengthened the case for the Fed to hike rates. Several interest rate-sensitive areas of the market continue to fall on the news. Stocks pared the losses after the European Central Bank (ECB) minutes showed they are open to expanding QE. Earlier in the week, the market sold off after rumor spread that the ECB may taper (reduce) QE (print less money) before the original deadline. Stocks fell on Friday after the jobs report missed estimates but rallied sharply after Draghi came out and said he is willing to expand QE, if needed. Don’t you just love this business. The U.S. government said U.S. employers added 156,000 jobs in September, missing estimates for 176,000. Meanwhile, the headline unemployment rate ticked up to 5.0%, just higher than the estimate for +4.9%. Meanwhile, August’s number was revised up to 167,000 jobs in August, higher than the original number of 151,000. In other news, overnight the British Pound experienced a mini flash-crash after it plunged 6% in 2 minutes. Fed Vice Chairman Stanley Fischer said Friday’s jobs report was “pretty close” to a “Goldilocks” number and Cleveland Fed President Loretta Mester said, the jobs report was “solid” and said it was time for the Fed to raise rates.

Market Outlook: Split Tape

The tape remains very split. The fundamental driver continues to be easy money from global central banks. Economic and earnings data remain mixed at best which means easy money is here to stay. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today if you want to talk to Adam about your portfolio. Visit: 50Park.com

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