Stock Rally: Will Third Time Be A Charm For Dow?

By: Chris Ciovacco | Wed, Apr 16, 2014
Print Email

Mobile Usage Hurts Google

The easiest way for investors to become more decisive in the financial markets is for earnings to justify higher stock prices. While after-hours quotes should always be taken with a grain of salt, Google was down 2.48% after releasing some disappointing figures late Wednesday. From Bloomberg:

Google Inc.'s costs are rising as the search provider finds it harder to keep up with a broad shift to advertising on mobile phones, with sales falling short of estimates. Google's audience is steadily migrating to smartphones, where the company gets less money for marketing spots than on desktops and tablets.


Dow Making 3rd Attempt At 16,580

Dow Theory

After pointing out a Dow Theory non-confirmation that was in place on April 4, the S&P 500 dropped over 50 points. Has the Dow posted a new closing high during this week's rally? Not yet. The inability to print a new high is indicative of investor doubt about earnings, the economy, and central bank policy. Janet Yellen's remarks helped boost stocks Wednesday, but those moves can be "one day wonders". We will see if the gains can continue on Thursday.

$INDU Dow Jones Industrial Average INDX


IBM Not Helping The New High Cause

IBM carries the third highest weight (7.7%) of any stock in the Dow Jones Industrial Average. Therefore, the reaction to Wednesday's earnings will impact the Dow Thursday. The early reaction was not favorable for Big Blue. IBM was down over 4% in the after-hours session on revenue concerns. From MarketWatch:

Revenue slipped to $22.48 billion, below the $22.91 billion projected by analysts polled by Thomson Reuters. It was the eighth straight quarter IBM has reported weaker revenue from year-earlier levels. Though the computing and tech giant remains a key provider of computer hardware, software and services to big corporations and governments around the world, IBM is struggling to respond to technological advances such as cloud computing, which allows customers to rent computing power and software over the Internet. Slowing demand in emerging markets, especially China, is also posing a challenge for Big Blue.

Dow Weightings


Investment Implications

Janet Yellen's stock-friendly comments helped spark a strong day in stocks Wednesday. Given the schizophrenic nature of the shifts between risk-on and risk-off in recent weeks, we prefer to see if stock gains can hold into the holiday weekend before considering any adjustments. You would think with stocks gaining ground Monday, Tuesday, and Wednesday, bonds would be getting killed. The long-term Treasury ETF (TLT) is up 0.49% this week, which indicates some ongoing economic skepticism. Both our stock (SPY) and bond positions are in the black for the week. We will see how the stock market handles the disappointing reports from Google and IBM.

 


 

Chris Ciovacco

Author: Chris Ciovacco

Chris Ciovacco
Ciovacco Capital Management

Chris Ciovacco

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE.

Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. CCM helps individual investors and businesses, large & small; achieve improved investment results via research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions.

Copyright © 2006-2014 Chris Ciovacco

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/