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Week-In-Review: Stocks Stall Below Major Resistance

11 SPXD- below amjor resisstanceStocks Stall Below Major Resistance As Earnings Season Begins

Stocks opened the week higher but stalled mid-week and closed mixed to lower after sellers showed up in the latter half of the week. Several important areas of the market, that had been leading for months, are now in “pullback mode” as we enter the heart of earnings season. Some of the recent leading areas such as: Defensive stocks, Consumer Staples, Food, Beverage and Utility stocks began pulling back last week after a healthy rally. We are also watching Gold and Gold stocks (another leading area) which stalled on Wednesday and are now pulling back to digest their latest rally. Transports (IYT), Financials (XLF), and a slew of energy stocks remain strong (XLE, XOP, OIH) which continues to bode well for the market. That is the positive sector rotation we are continuing to see beneath the surface. Since earnings season began, the big winners have been financials, a few transportation and commodity stocks. Meanwhile, the big loser has been big tech (GOOG, NFLX, ILMN, V, SBUX, MSFT, just to name a few). Technically, the market is pausing just below record highs which is perfectly normal after a big move. Next week we have another Fed meeting (yippee) and several hundred earnings reports. We want to analyze the health of this pullback to see if it is healthy or the beginning of something worse. Since Feb’s low, the S&P 500 has defended its short term 21 day moving average (just below 2070) almost perfectly. That is the first level of support we are watching. If that level breaks, then watch for the 50 and 200 DMA lines near 2012-2015.

Monday-Wednesday’s Action: Stocks Edge Higher As Crude Hits Fresh 2016 High

Stocks rallied on Monday, led by a huge positive reversal in crude oil, after oil producers decided not to freeze production on Sunday. A slew of energy stocks surged on the news. Earnings news was mixed. Morgan Stanley ($MS) fell after reporting a lousy quarter. Elsewhere, Hasbro (HAS) enjoyed a huge breakaway gap after the company reported numbers. The toy maker enjoyed a healthy quarter largely due to strong sales from Disney’s toys ($DIS). Disney also rallied nicely and jumped to a three month high after being upgraded.

On Tuesday, the market opened higher but sold off shortly after the open as a lot of money piled into commodity stocks as the US dollar fell. Crude oil broke out of its latest base and hit a fresh multi-month high. Silver soared over 4% and also vaulted to a fresh multi-month high. Netflix (NFLX), Illumina (ILMN) and International Business Machines Corp (IBM) all gapped down after reporting earnings. Goldman Sachs (GS) rallied even though they reported a big drop in earnings. Economic data failed to impress. Housing starts fell -8.8% to 1.089M, missing estimates for 1.167M.

Stocks rallied on Wednesday after crude oil broke out and hit a fresh high for 2016. This helped a slew of commodity stocks rally which lifted the broader indices. Earnings data was mixed. Shares of Yahoo (YHOO) and United Healthy (UNH) rallied after reporting numbers but others fell. Economic was relatively light. Existing home sales beat estimates in March, rising +5.1% to a 5.330 million annualized rate. Existing home sales fell -7.3% in February and the year-on-year rate was only +1.5% which is still weak. Gold, and a slew of gold stocks, reversed and closed lower which could be a sign of near term fatigue.

Thursday-Friday’s Action: Earnings Roulette Continues

Stocks fell on Thursday after the European Central Bank (ECB) held their latest meeting and several stronger than expected economic data was released in the U.S. The U.S. dollar rallied hard which put pressure on a slew of commodities and commodity stocks. Stocks were relatively quiet on Friday as investors digested the latest round of earnings data and the Bank of Japan (BOJ) hinted at more easy money. Shares of Alphabet Inc. (GOOG and GOOGL), Visa (V), Microsoft (MSFT), and Starbucks (SBUX) were some of the big cap stocks to fall after reporting earnings. Meanwhile, shares of Norfolk Southern Corp (NSC), Core Laboratories (CLB). and BJ’s Restaurant’s Inc (BJRI) were some of the stocks to rally after reporting earnings.

Market Outlook: Easy Money Back In Play

Stocks are pulling back as the S&P 500 flirts with its short term 10 day moving average. Economic and earnings data remains less than stellar but all that matters now- is easy money from global central banks. As always, keep your losses small and never argue with the tape.

Week-In-Review: Stocks Sit Below Major Resistance

111 SPX---- higher highStocks Sit Below Major Resistance As Earnings Season Begins

Stocks rallied last week as the bulls sent the major indices above important areas of resistance and within striking distance of fresh record highs. Most of the big financials rallied last week after reporting crummy numbers. This reinforces our point about focusing on the reaction, not the actual numbers. Corporate earnings are expected to fall by nearly -10% in Q1 2016 which will be the worst quarter for earnings since the financials crisis. Economic data also remains less than stellar but the very strong underlying bid in the market, that has existed since the Feb 11th low, remains in clear control. The bullish case is simple: Since Feb 11th, there has been virtually no selling and the strong easy money trade from global central banks remains alive and well (for now). It is also bullish to see the S&P 500 make a higher high last week, meaning it took out Dec’s high which is a short term positive for the market. Right now the major indices have soared since the Feb low and are now trading just below major resistance (record highs). To a lesser extent, we also want to be mindful that most bear market rallies last between 4-10 weeks and we just finished week 9. Gold steel and oil led on the way up. Last week, gold fell and pulled back into its 50 DMA line. There’s a big OPEC meeting on Sunday for oil. If these important areas start falling, this could be a big head fake for the major indices and could drag the market lower. We are entering the heart of earnings season over the next few weeks and want to see how the market reacts. Just to be clear on our stance, the bulls remain in clear control of this market until any meaningful selling emerges. Separately, we have received quite a few “Thank You” emails and calls in recent weeks regarding how we navigated a very difficult environment for you. Especially, when you factor in that Q1 2016 was the worst quarter in history for active managers and nearly all the big fund managers are down- and down big – this year. We are very well positioned for a very strong 2016 and beyond.

Monday-Wednesday’s Action: Stocks Rally As Earnings Season Begins

Stocks opened higher but ended near their lows as seller showed up in the afternoon. Before the open, rumor spread that central banks and governments should begin buying bank stocks to boost the market. Meanwhile, the US dollar fell to a fresh 9-month low which sent gold, silver and several other commodities higher. Tesla (TSLA) recalled 2,700 Model X SUVs after the company told owners not to have anyone sit in the back of the vehicle until it can replace the third-row seat backs, which could fail in an accident. In other news, Goldman Sachs ($GS) will pay $5 billion to settle federal and state probes from before the financial crisis. The Justice Department settled with GS regarding the sale of mortgage-backed securities.

Stocks ended higher on Tuesday, led by a big rally in a slew of energy stocks. Oil prices soared over 4% after news broke that OPEC was closer to freezing production. Gold, silver, oil and steel stocks have soared in recent weeks after pausing to digest the strong rally from the Feb low. Overnight, Italy created a $5.7B fund to buy bank stocks. Italian banks are sitting on €360 billion euros of bad loans. This is part of a new plan from Prime Minister Matteo Renzi to boost their lackluster economy. In other news, the IMF cut its 2017 global growth forecast to 3.5% from 3.6%. In the U.S., more misdirection came from the Fed. Federal Reserve Bank of Philadelphia President Patrick Harker said it may be prudent for Fed officials to wait for more evidence inflation before they raise rates again. Then Fed’s Kaplan Said “Fed Likely to Move in the `Not-Too-Distant Future.” This has been a common occurrence since last month’s Fed meeting.

Stocks rallied nicely on Wednesday helping the Dow Jones Industrial Average and benchmark S&P 500 jump above resistance of their latest range. Before the open, JP Morgan (JPM) reported earnings that beat greatly reduced estimates. Peabody Energy (BTU) filed for bankruptcy protection in the wake of a huge crash in coal prices. Overnight, China said exports beat estimates which bodes well for the global economy. Oil prices were quiet as the US dollar rallied. Saudi oil minister, Ali al-Naimi, said he will not cut production. This came one day after inter-fax said a production freeze would likely occur. In the U.S., retail sales fell -0.3%, missing estimates for a gain of +0.1% which strengthened the case for more easy money from the Fed.

Thursday-Friday’s Action: Financials Lead

Stocks were mostly higher on Thursday after more easy money was thrown at markets from global central banks. Overnight, Singapore surprised the Street when they unexpectedly eased monetary policy and looked to devalue their currency to stimulate growth. They are now back at emergency levels not seen since the 2008 financial crisis. Bank of America (BAC), Wells Fargo (WFC) and BlackRock (BLK) were some of the big companies that reported earnings on Thursday. BAC and BLK rallied while WFC fell. Elsewhere, the IEA lowered their forecast for global oil demand. In the U.S., Energy XXI, filed for bankruptcy which became the biggest casualty (so far) of the crude bear market. Stocks were relatively quiet on Friday as investors digested a strong weekly gain. Overnight, China said its economy grew by +6.7% in the first quarter of 2016, which came in just below China’s goal of 7%. Oil prices slid ahead of Sunday’s OPEC meeting in Doha about a possible output freeze.
Market Outlook: Easy Money Back In Play

Stocks remain very strong as there remains virtually no selling in the market. Economic and earnings data remains less than stellar but all that matters now- is easy money from global central banks. As always, keep your losses small and never argue with the tape. If you want help with the market consider joining: FindLeadingStocks.com.

 

Week-In-Review: Stocks End Week Lower Ahead of Earnings Season

1 SPX Lower HighsStocks End Week Lower Ahead of Earnings

Stocks ended lower for the first full week of the new quarter and before earnings season begins in earnest. The short term action remains sloppy (to put it nicely) and continues to frustrate both the bulls and the bears. Eventually, clean trends will emerge, but for now, patience is paramount. The intermediate term action remains sideways and the long term trend remains up. Stepping back, the big theme this year has been the unraveling of the strong dollar trade that has prevailed since mid-2014. This year, the Fed has been very vocal about their dovish stance (a.k.a easy money/weak dollar) and that has caused a lot of capital to flow into areas that have fallen due to a stronger dollar over the past 18-24 months. In the short term, the major indices had a very big rally from the Feb 11th low and are now digesting that move ahead of earnings season. Underneath the surface, we are seeing a lot of sector rotation taking place which is healthy in the near term. The big winners this year remain Gold and Silver, Utilities, Food, Defense Stocks and the other beaten down areas over the past 18-24 months. The big losers continue to be the areas that were working for most of 2015 (FANG stocks, biotechs, healthcare etc). Big money continues to move into Gold and Silver stocks as the metals try to bottom after a brutal 5 year bear market. Other beaten down areas which put in a near term low on January 20th are also pausing to consolidate their recent gains. These areas benefit from a weaker dollar: Steel ($SLX), Transportation ($IYT), Materials ($XLB), Energy Stocks ($XOP, $XLE, $OIH), Emerging Markets ($EEM), just to name a few. For obvious reasons, we will be watching the aforementioned areas closer as a “tell” for the market. Oil soared 63% in 5 weeks, then pulled back -17% before bouncing last week off its 50 DMA line. Since the Feb low, the S&P 500 soared +14.48% and is now pulling back to consolidate that strong run. Even with all this noise, the S&P 500 is still moving sideways and just made its 5th lower high since last summer’s all-time high. We now enter earnings season which is the next big catalyst for investors. If sellers show up and this turns out to be a huge bear market rally we will be ready. Most bear market rallies last between 4-10 weeks and we just finished week 8 (something to keep in the back of our mind). We know easy money from central banks has greatly distorted the playing field so we are prepared for any outcome. Without easy money, we would say with near certainty that the market is forming a large top and is heading lower. 

Monday-Wednesday’s Action: Stocks Drift Lower

Stocks fell on Monday as markets paused to digest the very strong rally we have seen over the past 8 weeks. Commodities dragged stocks lower even though the US dollar also fell. Factory orders fell -1.7%, missing consensus for -1.6%. Alaska Air ($ALK) said it plans to acquire Virgin America (VA) in a deal valued at $4 billion. Groupon (GRPN) rallied after the company said Comcast will invest $250 million. Comcast will work with Groupon on potential strategic partnership opportunities. In Europe, unemployment fell to 10.3% in February which was the lowest level since 2011. The IMF said a Greek deal is far off which weighed on investor confidence. Stocks fell on Tuesday as global selling continued across multiple asset classes. India’s Central Bank joined the easy money party and lowered its key interest rate to 6.5%, from 6.75%. Meanwhile, Australia’s Central Bank held rates steady. In the U.S. the PMI Service index rose to 51.3, higher than the prior reading of 49.7 and just above the boom/bust level of 50. The ISM service index came in at 54.5, beating estimates for 54. Overseas stock markets fell after sluggish economic data from Japan and Europe.

Stocks rallied on Wednesday, helped by a big rally in a slew of Biotech (IBB) and Healthcare (XLV) stocks. Transportation stocks lagged for most of the day as they pause to digest the recent rally. The Fed released the minutes of their latest meeting and the minutes reiterated the view that Fed officials are in no rush to raise rates. In other news, oil prices vaulted over 5% after a surprise drop in in U.S. crude supply.

Thursday-Friday’s Action: Stocks Continued To Be Sold

Stocks fell on Thursday as sellers finally showed up. The selling began in Asia and Europe and continued in the U.S. Japan’s stock market continued to fall as the Yen soared. European stock markets were mostly lower even though the European Central Bank (ECB) hinted at even more easy money! President Mario Draghi wrote in the bank’s annual report today that they won’t “surrender” to excessively low price growth. Then, the ECB’s Chief Economist Peter Praet, spoke at a conference in Frankfurt and made it clear that further stimulus would be provided, if needed. Big financials dragged U.S. markets lower as many big banks broke below their respective 50 DMA lines. After Thursday’s close, Janet Yellen, Ben Bernanke, Alan Greenspan, and Paul Volker (current and former heads of the Federal Reserve) spoke at a conference and reiterated the Fed’s easy money stance. Oil prices also soared over 6% which set the stage for a positive gap up on Wall Street. Stocks opened higher but closed near the lows for the day which is a sign of fatigue.

Market Outlook: Easy Money Back In Play

Stocks are still range-bound for the past 10 months. Patience is key until a bigger trend emerges. As always, keep your losses small and never argue with the tape. If you want help with the market consider joining: FindLeadingStocks.com.

Quarter-In-Review: Stocks End Historic Quarter Higher

11 SPX - 10 DMA line defendedStocks End Historic Quarter

Stocks remain very strong as the bulls continue to defend the short term 10 day-moving-average line for the major indices. The big news last week and last quarter is that easy money from global central banks is here to stay. For now, stocks continue to worship easy money and until that changes, the bulls are fighting to stay in control. Q1 2016 was a historic quarter by any normal measure and a very difficult quarter for most portfolio managers. Stocks experienced their weakest open to a year – ever. Then, had the Dow Jones Industrial Average had the strongest quarterly reversal since 1933! The story began with Gold and silver. Gold and Silver soared last quarter and are one of the strongest asset classes so far this year. Interestingly, Gold and Silver placed a near term low in December, and are trying to bottom after a 5 year brutal bear market (Gold and Silver have been falling since the end of 2011!). Then, on January 20th, a slew of other beaten down areas turned higher and are trying to bottom after multi-year bear markets. These areas include almost all the areas that have not been working over the past 18-36 months: Steel ($SLX), Transportation ($IYT), Materials ($XLB), Energy Stocks ($XOP, $XLE, $OIH), Emerging Markets ($EEM), just to name a few. For obvious reasons, we will be watching the aforementioned areas closer as a “tell” for the market. Then, on Feb 11th, oil and the major indices finally placed a near term low and soared into the end of March! Oil soared 63% in 5 weeks which is a huge move for a major global commodity. The S&P 500 soared 14.48% since the Feb 11th low and is now only -3.4% below a record high! Remember, in normal (non easy money) times, a 10% move for an entire year used to be considered healthy. We just had the S&P 500 soared nearly 15% in 6 weeks! Since the Feb 11th low, the bulls have done their best to defend the short term 10 DMA line for the major indices. We now enter earnings season which is the next big catalyst for investors. On the other hand if this turns out to be a huge bear market rally, we would be remiss not to note that most bear market rallies last between 4-10 weeks and we just finished week 7 (something to keep in the back of our mind). We know easy money has greatly distorted the playing field so, for now, until we see selling show up, the bulls have earned the benefit of the doubt.

Monday-Wednesday’s Action: Yellen Boosts Stocks

Stocks were relatively quiet on Monday as many overseas markets were closed for Easter and string of terror related events occurred. Over the weekend, a bomb exploded in Pakistan which killed 70 people at an Easter celebration. At 2:39pm EST, gunshots were reported in the U.S. Capitol visitors center which caused much of D.C to lock-down. The shooter was immediately apprehended and it appears to be a lone wolf situation. An hour later, NYPD shut down a portion of The Marriott Marquis in Times Square due to a suspicious package. Then around 4pm EST, Miami International Airport shut down Terminal A due to suspicious activity. Thankfully, the latter two were nothing serious. Economic data was mixed. Pending home sales rose by 3.5%, beating estimates for 1.5% in February. The Midwest led the way higher, as sales jumped 11.4%. Sales out West and in the South were also higher. The Dallas Fed Manufacturing’s general activity index jumped 18 points but was still in negative territory. The general activity index came in at -13.6, higher than the prior reading of -31.8. U.S. consumer spending rose slightly in Feb and matched estimates. In M&A news, shares of Starwood (HOT) rallied after the company received a higher $14 Billion Offer From China’s Anbang-Led Group. Stocks opened lower and closed higher on Tuesday after Yellen came out and reiterated her dovish stance.

Before Tuesday’s open, An EgyptAir flight was hijacked and thankfully was resolved quickly with no injuries. The hijacker surrendered and it appears to be an isolated incident related to the man’s ex-wife. Much of D.C. was on lock-down again after Capitol Police were called in to investigate two suspicious packages. Economic data was mostly positive. The Case-Shiller Index rose 5.7% year-over-year which helped the ailing housing market. Lennar (LEN) also rallied after reporting numbers. Meanwhile, Consumer Confidence rose to 96.2, beating estimates for 94. Yellen spoke at noon and largely reiterated her recent stance. Stocks opened higher on Wednesday but lost steam mid-day as some profit-taking showed up before the end of the month and quarter on Thursday. Before Wednesday’s open, ADP, the country’s largest private payrolls company, said private employers added 200,000 new jobs in February, almost matching the forecast for 203,000. The EIA said crude oil inventories grew by 2.3 million barrels to yet another record high of 534.8 million last week.

Thursday-Friday’s Action: Bulls Fight For Control

Stocks were relatively quiet on Thursday which was the last trading day of the month and quarter. This was a historic quarter by any normal measure. The major indices had the worst start ever to a year, then stocks reversed and the Dow had the largest positive reversal since 1933! With all the stock and oil volatility in 2016, gold shined and enjoyed its best quarter in close to 30 years! In other news, the popular rating agency, Standard & Poor’s cut their outlook for China’s credit rating to negative from stable. The rating agency said China’s economic re-balancing will take longer than the firm had previously expected. Friday was a bullish defensive day. Stocks rallied on Friday as the bulls showed up and defended the short term 10 DMA line for the major indices. Before Friday’s open, the government said U.S. employers added 215k (205k est) new jobs and the unemployment rate ticked higher to 5%. The ISM manufacturing index and consumer sentiment also beat estimates. Elsewhere, selling showed up in Japan’s Nikkei and in the oil market. Oil prices fell 4% after Saudi Arabia said they are not willing to freeze output unless Iran freezes. Iran has made it clear that it will not freeze so that put pressure on oil prices. 

Market Outlook: Easy Money Back In Play

The market remains very strong as the bulls continue to defend the short term 10 day moving average line for the major indices. As long as this continues, the market deserves the bullish benefit of the doubt. On the other hand, if this is indeed a bull trap (bear market rally) this is one of the strongest we have seen in ages. As always, keep your losses small and never argue with the tape. If you want help with the market, contact Adam or – Join FindLeadingStocks.com

Stocks Finally Pullback – Will It Last?

11 SPX - two double bottom patterns

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Stocks Finally Pullback- Will It Last?

Finally, the long awaited pull back arrived on Wall Street as the major indices pulled back and snapped a very strong 5-week win streak. The pullback began when a slew of commodities started falling as the US dollar rallied. Remember, commodity stocks led the way up so they are important to watch because they could lead the way down. Stepping back, markets are very overbought and are way overdue to pullback. In the short term, we want to analyze this pullback to see if it is a healthy or unhealthy pullback. If it is a healthy pullback which would be shallow in both size (small percent decline) and scope (short in duration) we will look to do some more buying. Conversely, if it is an unhealthy pullback, heavy selling across the board, then odds favor lower prices will follow. We have several big catalysts ahead of us: end of month/end of qtr, the jobs report and then earnings season. What concerns us is that the bull market is aging by any normal measure and global markets are trading all over the map. Typically, wide and loose swings are not healthy for an aging bull market. The one major caveat continues to be easy money from the Fed and other central banks. As long as markets continue reacting well to easy money- the playing field remains distorted. Since we are so close to the end of the quarter we don’t think we will see heavy selling ahead of Thursday. We will be prepared for early April because just like last quarter stocks moved sideways after a very strong rally from a double bottom pattern and then collapsed in the near quarter. We’ll see what happens over the next few weeks. We also want to note that most bear market rallies tend to last between 4-10 weeks, we just finished our 6th week. Since easy money is alive and well- we will look to buy if more bullish setups emerge.

Monday-Wednesday’s Action: Stocks Move Edge Lower Ahead of The Long Weekend

Stocks were relatively quiet on Monday as the market paused to digest the very strong rally we have seen since the Feb 11th low. Apple unveiled a few new (lower priced) products which are aimed at capturing a broader audience. In other news, Starwood ($HOT) accepted a higher offer from Marriott International Inc ($MAR). Existing home sales fell -7.1% to 5.08M, missing estimates for 5.3M. Overnight, the governor of the People’s Bank of China was cautious about corporate debt. China’s central bank warned that the ratio of corporate debt vs gross domestic product had become too high which may become a big problem in the near future.

Before Tuesday’s open, stock futures were slightly lower after two horrific terror attacks occurred in Brussels. Flights in and out of the airport were cancelled for the rest of the day and the city suspended their transit system. U.S. stocks opened lower but buyers showed up and kept losses at a minimum as big money flowed into biotechs and other Nasdaq 100 stocks. Understandably, airline and other travel stocks fell on the news. Economic data was mixed. The Federal Housing Finance Agency (FHFA) House Price Index (HPI) rose +0.5%, missing estimates for a gain +0.6%. The PMI Manufacturing Index rose to 51.4, missing estimates for 52.4. The Richmond Manufacturing Index rose to 22, beating estimates for unchanged.

Stocks fell on Wednesday, dragged lower by falling commodity prices. Crude oil fell over -4% and broke below $40 a barrel. Gold prices tumbled over $30 dragging a slew of commodity stocks lower. The US dollar continued to rally as it bounces back from deeply oversold levels. Remember commodities tend to rally when the greenback falls and fall when the greenback rallies.

Thursday-Friday’s Action: Commodities Pullback

Stocks opened lower on Thursday but closed near their highs as the very strong underlying bid continued to show up. Economic data was mixed. Weekly jobless claims came in at 265k. Meanwhile, February durable goods orders fell -2.8%, slightly better than the Street’s estimate for -3% . Finally, the Markit flash U.S. services PMI was 51.0 in March, beating estimates for +49.8. Stocks were closed on Friday for the holiday but the government reported the latest reading on GDP.

Market Outlook: Time To Pullback?

The market was deeply oversold so keep in mind the strongest rallies in history occur during bear markets (a.k.a bull traps). As always, keep your losses small and never argue with the tape. If you want help with the market, contact Adam or – Join FindLeadingStocks.com.

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