Stocks Finish The Week On A High Note

The Dow Jones Industrial Average was up more than 400 points at session highs on Friday before closing out the week with a 332 point gain(+1.4%):

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The Nasdaq Composite, powered by a huge gain in Apple, finished even stronger.  The tech heavy index closed with a 1.7% gain(+121 pts):

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Some color from Schaeffer’s Research:   The Dow soared on Friday, as news that Warren Buffett substantially increased his Apple (AAPL) position sparked a huge move from the tech giant. In fact, shares of the iPhone maker hit an all-time high and closed the week up 13.3% — the best week in years for AAPL. The broader tech sector rallied as a result, helping the Dow and S&P erase almost all of their weekly losses, and ushering the Nasdaq to a weekly win. Elsewhere, investors also digested the nonfarm payrolls report for April, which revealed the lowest unemployment rate in 17 years, along with another strong uptick in oil prices.

Super Turn

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From strategypage.com:  PACIFIC OCEAN (April 25, 2018) An F/A-18F Super Hornet assigned to the Mighty Shrikes of Strike Fighter Attack Squadron (VFA) 94 flies above the aircraft carrier USS Theodore Roosevelt (CVN 71). Theodore Roosevelt is underway for a scheduled deployment in the western Pacific. (U.S. Navy photo by Mass Communication Specialist Seaman Michael Colemanberry)

Unemployment Rate At Lowest Level In Nearly 20 Years.

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How did we get here?  91 consecutive months of jobs growth, by far the longest streak in history. 

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Impressive. 

Hat tip Charlie Bilello

 

Just Because Earnings Have Been Strong

Doesn’t mean stocks will go up.  Yes, earnings so far this reporting season, have been very impressive:

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But, the reality is, this doesn’t guarantee the S&P 500 Index will rise:

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Key bit from Charlie Bilello:  The market doesn’t have to go up just because earnings are going up. We saw this In 1994, 2000, 2002 & 2011 (note: price returns). But if earnings grow 26% this year and stocks finish lower, would be highest earnings growth for a down year.

Something to keep in mind.  It’s going to be a volatile year…

AAPL

Nice Weekly Chart (each candle is a week).  New high breaking out of trading range.  Watching to see if it closes at a new high.

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DJIA

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Jobs Growth Disappoints In April

But the unemployment rate dipped to an 18 year low(3.9%).  This morning’s employment report for April showed a 164K increase in total nonfarm payrolls, which was worse than forecasts.  The Investing.com consensus was for 189K new jobs and the unemployment rate to drop to 4.0%.

payrolls april 2018

Some highlights from Zerohedge.com:   Employment in manufacturing increased by 24,000 in April. Most of the gain was in the durable goods component, with machinery adding 8,000 jobs and employment in fabricated metal products continuing to trend up (+4,000). Manufacturing employment has risen by 245,000 over the year, with about three-fourths of the growth in durable goods industries.

Health care added 24,000 jobs in April and 305,000 jobs over the year. In April, employment rose in ambulatory health care services (+17,000) and hospitals (+8,000).

In April, employment in mining increased by 8,000, with most of the gain occurring in support activities for mining (+7,000). Since a recent low in October 2016, employment in mining has risen by 86,000.

Bonds are lower on the news.  Stock are responding quite well, could finish the week at new May highs.

Hat tip Zerohedge.com/advisorperspectives.com

Hot Option Action In Harley-Davidson

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HOG has been struggling to hold a major support zone this week.  This key area, between $41.70 and $40.50, held the summer 2016 lows as well as the March and April lows this year.  The June low back in 2016 marked an important low for the stock.  By the end of the year HOG was 40% above the June bottom. 

Since reporting strong 1st quarter results last week the stock has failed to gain traction.  HOG closed Thursday with its fourth straight loss completely wiping out the post earnings upside momentum.  Selling pressure since earnings has been very light indicating possible downside exhaustion.  Another indication of a potential bottom is the recent action in HOG options. 

Here’s some interesting color from Bob von Halle:

Huge buying in HOG June 40 calls between $1.20 and $1.50 with stock trading either side of $40 per share. Over 16,000 contracts have traded on the day…making it the largest open interest strike in near term options by a wide margin. With over 15% of the float sold short in HOG, possible that some of this buying is a hedge in case the stock rebounds from its recent sell off. Could be some speculative buy interest as well, but whatever the case, this is notable option activity in this name.

At time of publication we do not have a position in HOG. 

Altria Looking Attractive

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Shares of Altria are holding up well today.  While the major indexes were dipping well below last week’s low MO remained above yesterday’s low.  At mid day the stock is up over 1.4% and is heading for its best close of the week.  With earnings now out of the way, and major support near the 2016 low intact, a healthy rebound may be on the way.  At the April low MO was down over 22% from the January peak.  

Trading notes.  After a big jump in downside volume in late April selling pressure has eased dramatically of late.

Back in early January of 2016, just before a powerful bull leg began, MO left behind multi-week lows near $56.00.  This was during the same period that the S&P 500 Index was suffering a steep sell off. 

We consider Altria a low risk buy near current levels.  Major support is in place from $56.20 to $54.20.  Initial upside target is the March lows($59.00).  A close back below $54.00 would send a clear warning sign that a more prolonged basing pattern is ahead.

At time of publication we are long MO.

SPY

Testing support and the 200 Day.

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