It was another spectacular week in world equity markets with the SP-500 and Russell 2000 indices making new all-time highs. Meanwhile the Nasdaq 100 made it out to a 13-year high and has now retraced about 75% of its huge 80% decline between the high in March of 2000 to the low of December 2002 in the bursting of the tech bubble.
All this bullishness sent my net worth out to new all-time highs for the 4th separate time this year. My favorite social media stock Facebook, had a spectacular week tacking on 10.4% to a new all-time high. As we can see from the chart on the left, the stock has not yet made it to the 161.8% extension of the recent high to low swing. I expect much higher prices ahead and earnings are not due until 10/30/2013 after the close.
And speaking of spectacular, Google announced blowout earnings on Thursday afternoon, and the stock went parabolic, closing the regular session at 888 then sharply higher in the after hours session. By the end of the day Friday, Google closed at 1011.41, up a spectacular 123 points or 13.5% for the day!This caused a feeding frenzy for all things tech and ignited a huge broad market rally on Friday. I did not participate in Google, but went out long the GOOG next Friday 995 call expecting a gap up on Monday. Many investors would never consider taking a long position after such a big up move,. But experience has shown that moves like this typically lead to continuation and I expect to flip out the call for a nice gain into a gap up on Monday. The stock traded as high as 1015 in the after hours on Friday so that trade is looking good so far.
Part of this week's rally was due to a deal in Washington that ended a 13-day government shutdown and extended the debt limit until mid-February. The country also came dangerously close to a default on its debt which led to much concern around the globe including a pair of editorials in China newspapers scolding the US for being so irresponsible with the threat of default of debt payments. The newspapers also called for a de-Americanized world economy less reliant on the US dollar as the world's default currency.
Students of American history will recall that politics in the US has always been a bitter partisan struggle. From the battle between States Rights versus Federalists to North versus South, Republican versus Democrat, Red States versus Blue States, American politics have always danced on what seems like a razor edge between opposite interests. It all came to a head in the election of 2000 when the race between George W Bush and Al Gore was so close it came down to the decision of one state - the state of Florida. The declared loser Al Gore challenged the outcome in the Florida Supreme court. After an agonizing 6 weeks of uncertainty, the impasse was ended when the US Supreme Court trumped the authority of the State of Florida Supreme Court and declared George Bush the winner.
The point is the US system is designed to resolve these issues in favor of the majority - no matter now narrow it is. The winner-take-all nature of the presidential electoral system is designed to enforce unity by making the outcome of elections seem much more decisive than would occur if it came down to a populate vote. And the 3-way power split between the House, Senate and the Executive branch almost forces 2 of the 3 powers to come down on one side or the other. In this case, the Senate and the President (controlled the Democrats) came down on one side and the House of Representatives (controlled by the Republicans) came down on the other side. Anyone with an elementary school education in US Politics could see that there was no way the Republicans could win. They finally gave in with less than 12 hours to go before default.
Despite all the drama, the stock market just seemed to shrug it off and even rallied in anticipation of a deal before it was even announced. So for all you out there that think America politics is a mess, you are right. But get used to it, because this is how it works.
Meanwhile, I continue to be impressed by the ThinkorSwim platform. The Calendar feature on the Marketwatch tab gives a quick graphical overview of key events by day of the week and time of day. Events are color coded by Dividends (Green), Earnings (Blue), Conference Calls (Red), Stock Splits, (Purple), and Economic Events (Violet). Click on an item to get details of the event. Check and uncheck the boxes on the left side to show or hide various combinations to meet your needs.
Finally, the Chart tab has a number of cool features that side in from the right or from below. This view shows the Level 2 screen which shows the depth of bids on the left and offers on the right. This gives you an easy visual representation of whether there is more demand (bids) or supply (offers) for the stock. Check out this screen shot of the Level 2 screen for Facebook and tell me whether there are more bids (left) or offers (right).Funding for my Thinkorswim account is in progress and I proceed once I start to get the proceeds of my Forex Accounts.
That's all for now, have a great week ahead.
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