Craig Johnson’s

Market Commentary

Monday, November 10, 2014

Financial Markets Recap for Last Week:

  • The stock market continues to push higher. The Dow Jones Industrial Average and the S&P 500 rose for the third consecutive week. Both indices also recorded all-time highs.
  • The Nasdaq Composite and the Nasdaq 100 recorded new 52 week highs finishing slightly higher for the week. The Russell 2000 closed a bit lower for the week.
  • On Wednesday, the Dow Theory followers were pleased with the Dow Jones Industrials (DJIA), the Dow Jones Transports (DJT) and the Dow Jones Utilities (DJU) all closing at record highs. This hasn’t occurred in many years. The basis of the theory is when the DJIA and the DJT confirm a bullish scenario by recording new highs, it is believed that a further move higher will occur. On the other hand, a recording of new lows by each paints a negative future picture. The additional confirmation of the DJU, which happened last week, adds even more substance to the bullish scenario.
  • This week the third quarter earnings impact on the market will be dwindling as the number of reports shrinks quite dramatically. It has been a good earnings season with nearly 80% of the companies in the S&P 500 meeting or exceeding their earnings estimates, while 60% met or exceeded their revenue estimates. Keep in mind, even though it appears the numbers have been quite positive many of those companies are beating reduced estimates.
  • The U.S. dollar continued to climb ever higher, while the price of oil moved lower. Crude oil prices closed at a multi-year low last Monday at just above $77 a barrel, but managed to finish the week near $78.50.
  • Gold prices were on their way to another shellacking as gold recorded the lowest levels it has been at in four and a half years on Wednesday and Thursday. A sharp bounce on Friday brought the metal back to close near $1176 an ounce.  

Financial Markets Health and Outlook:

  • The stock market is short term overbought and could give way to a pullback or consolidation of the recent gains at any time. The overall trend though is higher and further gains are likely as the market begins the seasonally strong period in November. Historically, November has been the strongest month for the Russell 2000. (Repeated from last week).
  • The stock market’s advance has been relentless recently and has forced many to throw in the towel and buy stocks at higher prices. Typically the market will consolidate those gains with a period of sideways activity or a pullback in the magnitude of about 5 – 7% on an intraday basis. Either scenario is quite likely in the near term.
  • The yield on the ten year U.S. Treasury note has been moving basically sideways during the past two weeks. A stronger economy would likely move the yield higher over the next six months, but a lackluster economy would keep the yield moving sideways to lower. The weakness in the global economy makes it more unlikely that higher interest rates will be occurring anytime soon.
  • After rallying for five consecutive weeks, wheat, corn and soybean prices finally paused and declined slightly. They remain deeply oversold, but have moved higher in rapid fashion during the previous weeks.

Sources:,,, Dow Jones News, Financial Times,, Investor's Business Daily,,, Thomson Reuters/First Call, U.S. Dept of Treasury, and individual company web sites and press releases.

Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change without notice.  The material contained herein is for informational purposes only and obtained from sources we consider reliable. We make no guarantee as to its accuracy or completeness.  References to specific securities and industries/sectors should not be considered recommendations to buy or sell any security or advisory service.  Past performance is not a guarantee of future results.