StockDesk Monday Update: Stocks Star...
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Richard Cox
StockDesk Monday Update: Stocks Start Week in Reach of All-Time Highs

Stock markets were positive last week as investor sentiment continues to be supported by better than expected corporate earnings and pledges from central banks around the world to inject stimulus and promote growth in sluggish economies.  The S&P 500 fell back from its highs on Friday but still closed higher by 1.7% for the week.  Some of the most encouraging headlines came from UPS, Boeing, Apple, DuPont, and Halliburton, all of which closed much higher on improved sentiment and earnings results.  Commodity shares were the best performers in the 10 S&P industry groups, with oil and gold attempting rallies after hitting new lows for the year.   Thus far, 240 companies have reported first quarter earnings with nearly 75% of those companies beating earnings estimates.

For the most part, these earnings expectations have been relatively weak, so it is not taking substantial corporate performances to improve on the analyst estimates.  In addition to this, markets are now showing an increasing expectation that the European Central Bank will cut interest rates at its May 2nd meeting.  Similar expectations are seen for the US, with last week’s GDP coming in at 2.5% (below the consensus estimate of 3%).  This is seen supporting the argument that the Federal Reserve will reaffirm its commitment to continue its bond-buying program.  The next opportunity for this comes at the May 1st monetary policy meeting, and this will guide the overall trading bias for the remainder of the week.   Volatility could slow earlier in the week, as traders might look to avoid establishing large positions before the Fed commentaries are made public.

Chart Perspective

Apple (APPL):  

APPL saw a strong rally after hitting lows below 400 last week.  We are starting to roll over here after hitting the resistance line from the medium term downtrend channel, and a loss of 405 will likely trigger stop losses and target a retest of 397.  This area is historical support as well as the 61.8% Fib retracement of last week’s rally.  If prices are not able to hold here, expect a test of the support line for the downtrend channel, below 380.  Indicator reading on the shorter term charts are starting to show a negative cross, with the MACD looking over-extended and the shorter term MA crossing below the longer term MA.  An upside break of 412 invalidates the downtrend channel and turns the bias bullish.

Ford (F):

We take another look at Ford, which still has yet to break important historical resistance at 13.50.  Prices are still grinding through the Fibonacci resistance that is seen just below here, but we cannot start to target a full retracement back into 14.20 until the additional historical level is removed as well.  Entering into long positions here risks the possibility of a false break, so wait for at least an hourly close above 13.50 before buying.  Once 13.50 is removed, the stock becomes a “buy on dips” until prices rise back to the old highs at 14.20.

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