Apple Down at Open – A Warning Shot ?

Investor’s first read – Daily edge before the open
DJIA: 17,990
S&P 500:2,091
Nasdaq Comp.:4,888
Russell 2000: 1,150c
Wednesday: April 27, 2016 9:08 a.m.
The minutes of the FOMC meeting will be released today at 2:00 p.m., but a press conference is not scheduled to follow, strongly indicating no change in the Fed’s benchmark interest rate.
That does not mean the minutes won’t contain warnings of an interest rate increase in coming months, which could jolt the market.
The news front is quiet, almost crisis free, so maybe the Fed will toss some tough talk in just to keep the Street on its heels.
So far, Q1 earnings are a smidge better than expected, another down quarter does not seem to disturb the Street which is looking for better Q4 results.
While DuPont (DD), Procter&Gamble (PG), Lockheed (LK), and 3M (MMM) beat expectations, Alphabet (GOOG), Apple (AAPL), and Microsoft (MSFT) didn’t.
Now that the nominees for both political parties seem a sure thing, the Street will be more focused on what to expect next year, which should prompt more and more uncertainty as we descend on November. That increases the odds of a correction starting in coming weeks (see below).
The Street will focus on the FOMC report at 2:00 p.m., but at some point here the November elections will have more and more of an impact. We know what to expect from the Fed report today, we don’t from the results in November.
This just in: Apple (AAPL) is down sharply in pre-market trading, which could trigger a sell off in other tech stocks.
SUPPORT “today”: DJIA:17,863; S&P 500:2,077; Nasdaq Comp.:4,851.
RESISTANCE “today”: DJIA:18,077; S&P 500:2,101; Nasdaq Comp.:4,917.
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 new DJIA “divisor” (0.14602) to get the DJIA for those levels. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages.
As of Apr. 22, 2016, a reasonable risk is 17,792 a more extreme risk is 17,634. Near-term upside potential is 18,340.
(I will repeat this regularly to keep readers aware of the potential for an April correction)
The market is tracking a pattern for presidential election years where an administration is in its second term.* The news is bad.
Historically, these markets have declined in Jan./Feb., rallied in March then topped out in early April, plunged in May with brief rallies in June and August and a plunge into October prior to the election.
The S&P 500 is in its 8th year of a bull market, selling at 17.8 X earnings, only 2.5% off its all-time highs, after a 212% bull rise.
Corrections started in spring in each of the last six years, the biggest being 19.8% in 2011, and smallest 2.3% in 2,014.
They started: 2010 (Apr. 26), 2011(May 2), 2012 (May 1), 2013 (May 22), 2014 ( May 13), 2 015 (May 15). The 2014 correction was insignificant, the 2015 more of a trading peak that trended sideways-to-down before the August flash crash.
So far, Q1 earnings are mixed-to-slightly better than projected. The key will be guidance and projections for Q3 and Q4.
 STATUS OF MARKET: Neutral – but vulnerable. Expect volatility
 OPPORTUNITY: RISK: Risk high, Profit taking justified.
 CASH RESERVE: 25% – 45%. Consider 75% now if tolerance for risk is low.
 KEY FACTORS: Outlook for Q1, and 2016 earnings questionable. Fed has market under its spell.
Note: Source of weekly economic calendar and good recap of indicators:
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.