Any Rally Here Must Be Robust

Investor’s first read Daily edge before the open

DJIA: 17,731
S&P 500: 2,102
Nasdaq  Comp.: 5,146
Russell 2000: 1,244

Friday,  July 24, 2015   8:28 a.m.

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TODAY: Looks like a mixed open. Any rally here must be robust, or it is suspicious.  Another spike down is needed to clear the air before any chance of a meaningful recovery.

     The Street has not yet showed its hand on earnings, Q2 and especially projections/guidance for coming quarters. Traders can place bids below the market in hopes of catching a rally, but sit close to the exits in the event this slide in prices gains momentum. 

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RESISTANCE today starts at DJIA ;17,78;  S&P 500: 2,107 ; Nasdaq Comp.:5,161

SUPPORT today:  DJIA: 17,647; S&P 500:2,102; Nasdaq Comp.:.  5,087.

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NOTE: Support and resistance levels are where I expect the intraday prices of the DJIA, S&P 500 and Nasdaq Comp. to reverse or close. Buyers should be cautious when a resistance level is reached but consider buying when support levels are reached. Sellers should consider taking action when resistance levels are reached and defer selling when support levels are reached. These levels are picked daily and based on my application of technical analysis.
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  • STATUS OF MARKET: Market is in correction mode after sharp run up where it hit a wall.  For the market to hold on to its positive mode, this correction must find buyers a smidge below current levels (see :support” above)  Then too, any rally from here must be robust. No room for rally failures.
  • OPPORTUNITY: Volatility has set in and overhead supply is building
  • RISK: Above average with news sensitive market.
  • CASH RESERVE: 25%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION: Price/earnings valuations are above the “norm,” the economy is iffy, and corporate earnings in Q2 will be down. While we need another week or so to get a feel for how the Street  will react to Q2 earnings, a cash reserve is warranted.

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SUMMARY  (No change)

     The biggest factor here is the U.S. economy.  Will it rebound from its reported Q1 slump, which most likely  was distorted by weather, oil prices, the impact of a strong US dollar, even seasonality ?

     Recession does not look like a real risk, so much as a “pause” in the economy.

      Q2 earnings are coming in and suggest the Street is “over” estimating Q2 and beyond.  Just a feeling I have.  FactSet Research sees year-over-year  for Q2  coming in as a decline of 4.5% with a return to growth developing in Q4 of close to +4.2%. It’s the latter that could sink stocks into an ugly slide.

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THE FED

      The guessing game continues – Will the Fed bump interest rates up in September, or later ?

      Obviously, their decision will key on the strength of the U.S. economy where housing is taking the lead and now consumer expectations are soaring.

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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  July 16,  a reasonable risk is 18,000c; a more extreme risk is 17,950 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,329. Yesterday, the DJIA broke below 17,950, but 120 points of that was IBM’s loss. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

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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.

-Greece:  I DON’T  THINK GREECE WILL BE IN THE EURO A YEAR FROM NOW

Note: Source of economic data

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

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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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