A Bounce Here Must be Convincing

Investor’s first read Daily edge before the open

DJIA: 17,766
S&P 500: 2,079
Nasdaq  Comp.: 5,021
Russell 2000: 1,253

Tuesday, June 9, 2015   9:17 a.m.

SUMMARY:

      Yesterday’s market action did some  damage to the bullish case as an afternoon rally was quickly reversed to downside suggesting that  buyers were in no hurry to jump on lower prices, something the bulls have been quick to do in recent sessions.

      We have been here before, and just about the time  a full scale sell off seems “sure” to follow, the market rallies.

      A bounce from here or off slightly lower levels is likely. What needs to be analyzed is the intensity of that bounce.  If strong, more upside will follow. If weak and uncertain, another plunge is likely and possibly below the four month trading range that has contained stock prices.

     I have made slight adjustments to that trading range (DJIA: 17,600 to 18,300; S&P 500: 2,040 to 2,130; Nasdaq Comp.: 4,856 to 5,100).

      The Bulls have been so confident the market will press higher as long as the Fed keeps interest rates at these levels. If suddenly they decide it’s time to stop buying and sell, we are looking at an 8% to 14% drop, or 1,430 – 2,500 points in the DJIA.  The reason would be, they would all see the downside risk at the same time and hit the exits, which under those conditions would be narrow, getting narrower.

RESISTANCE today is DJIA: 17,827; S&P 500: 2,086; Nasdaq Comp.: 5,036.

SUPPORT today is DJIA: 17, 690; S&P 500: 2,073; Nasdaq Comp.: 4,995.
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GREECE (ugh – go away – please)

The consequences of Greece exiting the Eurozone are so dire, a compromise is likely. Not only would it be devastating to Greece’s economy, but its impact on global banking and financial circles would be dramatic. Don’t be surprised if this is a white knuckle one before resolution (this weekend ?)

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ALERTALERTALERT, etc.

     The six months period between Nov. 1 and May 1 has historically been the best six months for the stock market.* The six months between May 1 and Nov. 1 has underperformed. Consistent as this seasonal pattern has been, it must be noted that opportunities to trade against these trends have occurred often.  Analysts and the press will make a lot of noise about this phenom in coming months –  be careful.

     The DJIA and S&P 500 are unchanged since April 30.
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My Technical Analysis of the 30 DJIA Companies:  

On occasion, I technically analyze each of the 30 DJIA stocks  for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the DJIA “divisor” (0.1498588) to get the DJIA for those levels.
     As of  June 5, a reasonable risk is 17,763; a more extreme risk is 17,556 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,160.  

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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
Q2 earnings for some companies will suffer from U.S. dollar’s strength and plunge in oil prices.
-Market still keyed on the Fed and it’s first bump up in interest rates, which with a slight softening in recent economic reports looks like it may happen later rather than sooner.
Recent strength in employment and housing industry shifting concern from a weakening in the U.S. economy to enough strength to prompt an early bump up in interest rates.

Note: Source of economic data

For a weekly economic calendar and good recap of  indicators, go to mam.econoday.com.

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*Stock Trader’s Almanac

George Brooks
Investor’s first read
A Game-On Analysis, LLC publication

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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk

 

 

 

 

 

 

 

 

 

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