Best 6 Months to Own Stocks Starts at All-Time Highs

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,783
S&P 500: 3,609
Nasdaq Comp.:11,899
Russell:1,791
Wednesday   November 18, 2020     9:12 a.m.
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brooksie01@aol.com
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November 15, 2019 (DJIA – 28,004)   I Called for a bear market to start in January, that the initial plunge would be 12%-18% – “straight down.” It started mid-February, dropped 16.3%, rallied then  plunged another 32.8%.
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January 20, 2020 (DJIA:29,348) My blog,  “INSANITY,” projected a bear market decline of  30% – 45%. The DJIA plunged 38.4% in 21 days.
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With the DJIA at 18,591on March 24, I wrote that , while I see lower prices later in the year, I expect a big rally with the upside potential of DJIA 22,037 (S&P 500 : 2,617) – it went higher.
With the DJIA at 23,942 (S&P 500) on April 15, I
called for  an end to  rally, up 29% but well short of  today.   how far the rally extended.  On May 18, I began to warn of  Bubble #2
August 6, I headline “SELL” with DJIA at 27,201 (S&P 500:3,327). Another “Fed” bubble.
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The market is tiptoeing through a minefield here. The Street is gearing up for the classic best six months of the year (Nov. – Apr.), a consistent bullish pattern going back to 1950 discovered  by the Stock Trader’s Almanac (2021 now available).
Its consistency will be challenged by the fact lift-off here is beginning as the market is hitting all-time highs.
     I am bullish on the election results, holding my breath the outgoing administration doesn’t do something stupid and dangerous before it is shown the door. I am not bullish on the transition which for the first time ever is being impeded.
The risk here is another COVID-induced slump following the sharp rebound in the economy since recession lows in February – March.
BOTTOM LINE:
   It is a stock picker’s market, but not a riskless market. The new normal is the flash crash, a vertical freefall in prices of 12% – 18%.   The last one we have seen is the February – March 35% – 21-day  plunge. It can happen.  COVID did it then, and could do it again.

Estimated trading Range Today:
DJIA:  29,921 – 29,775
S&P 500: 3,624 – 3,660
Nasdaq Comp.11,936 – 11,889
QQQ:    293– 291.9

 

PFE: 37.90 – 35.80
MRNA: 95 – 89.3
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RECENT POSTS:
Tuesday  November 17, 2020 (DJIA:29,783) “Market Rigged ?”

Here is what  drives me up the wall, sticks in my craw, wakes me up at 4 a.m.: The stock market is hitting all-time highs when so much of our world, economy, life-style, spending habits, needs, traditions and health are in a tailspin.
That is not how it has ever worked. That breaks all the rules of common sense. That defies gravity. That goes counter to time-tested measures of value.
       WHAT IS GOING ON HERE ?
       It’s the freaking algos !
Humans don’t make investment decisions like this. Unless most of the Street is prescient enough to see wonderment in the future (unlikely), these are the kind of conditions that are accompanied by bear market bottoms not markets hitting new all-time highs.
These are the conditions that make markets more difficult to buy.

But, until enough algos are re-programmed for reality, the stock market will hang tough.
However, at some point, the future will look dire enough, or something (like COVID) will force analysts and traders to override their algos, maybe scrap them altogether.
        This will all happen at the same time, since these dudes  track the same indicators.
It starts with a sudden dearth of buying.  Stocks will be too rich to buy in light of the foreseeable future. After a swift 12% – 18% drop, the market attempts to  recover, but is hit with more selling driving it lower.
While algos know no fear, humans do. The selling mounts, news worsens, Clients start yelling at money managers. PANIC !
No one is willing to buy – everyone thinks the market will go lower.
It doesn’t.
       The smart money moves in, and it is a long time until everyone else follows.
CAN’T HAPPEN ?  It did earlier in the year when the market fell 35% in 21 days.  Without Fed and Congressional stimulus, the market would be down 45%- 50%.
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BOTTOM LINE:        RIGGED ?
Is the stock market rigged ?  In a sense it is. A better term would be corralled within roughly defined trading ranges.  No committee meets to decide which was it will go near-term, but collectively through many algorithms and group-think, the message is “BUY” and sell only to switch positions.
     That’s my observation charting stocks and in the early days, trading off the ticker tape, writing thousands of daily analyses.
The market trades so differently today, and it’s all about big money doing a host of strategies most programmed in computers.
Human traders don’t act like this. The Street wants to party on, most market vets are not drinking, and the public is hoping they aren’t about to be blind-sided by  a bear market, maybe they can make just a wee bit more money before a big correction.
Soooo, It would be wise to have a cash reserve in line with one’s tolerance for risk, i.e., if you are faced with a large near-term  expense or  no longer have an adequate income and are drawing down money from your investment account, you want  a greater reserve.
     OTHERS CAN PLAY –  JUST SIT CLOSE TO THE EXIT.
This will be a stock pickers market as  new ideas will replace old ones, namely the overworked growth stocks.  Drug stocks should get more action, as excitement mounts with announcements of new vaccines.
       INFRASTRUCTURE stocks should  get a play. Clearly, our nation needs upgrades. For some reason this area has been overlooked for decades.
The need for a host of categories is dire – roads, bridges, seaports, mass transit, waste and water management, power grid, telecom, Hazmat, computers.
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Estimated trading Range Today:
DJIA:  29,946 – 26,586
S&P 500:3,624 – 3,611
Nasdaq Comp.11,920 – 11,875
QQQ:    292 – 291

PFE: 36.50 – 34.60  – one-day reversal possible
MRNA: 104 – 96.85 – any selling should dry up at open
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Monday November 16, 2020 (DJIA: 29,479) “How Much RISK Can You Afford ?”
The BIG NEWS today is what we all knew was going to happen – another vaccine with promising effectiveness greeted the Street  today.
Moderna (MRNA) claims a 94.5% effectiveness for its vaccine according to preliminary data. Just a week ago, Pfizer (PFE) announced a vaccine with comparable effectiveness, however, its vaccine requires a more demanding refrigeration.   More vaccines will be announced.

The Key here is, what will happen to in economy in the interim, since these vaccines will not be distributed until well into 2021 ?
I don’t have the answer and won’t guess.  So many balls are up in the air at this point.  The stock market is red hot this morning, but from levels that according to the simplistic Buffet Indicator (Stock market cap to GDP) is more overvalued than at any time in the past.
       Again, I don’t have the answer.  A year ago, I warned that the 2009 – 2020 bull market would end  in January. It didn’t until February with the help of COVID”S rampage and the federal government’s inept response to it.
With infections out of control and many Americans refusing to take precautions, it is likely to bring the economy to its knees once again.
So what about the stock market ?  Will it continue to go up while key parts of  the economy goes down ?
         Again, I don’t have the answer.  The case for bears is historic overvaluation. The case for bulls is wait until next year.
The market is tempting everyone to go all-in as it always has at all  extreme overvaluations in the past, as it did in January 2020.
It boils down to RISK. How much can one afford ?  Can the economy, businesses and individuals survive until stability returns ?
Clearly, it will be a stock pickers market, more for traders capable of moving quickly in and out of stocks.  Poor timing can crush less savvy investors.
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No post Friday November 13, 2020
Thursday November 13, 2020 (DJIA:29,397) “Any Parallel Today With 2007 ?”
The stock market should get a boost when President Trump concedes. It appears Republicans are considering a gambit to highjack the electors of key states  in an effort overturn the election results, taking the decision to the US Supreme Court. Not going to work.
He is trailing by 5.3 million votes ( and counting) nationally and by healthy margins in states that would make a difference.
Any attempt to reverse the will of the people could take a toll on stock prices.
Expect the Street to crank out lists of “Biden stocks” to buy and Trump stocks to sell.
      Just watched “The Big Short” again last night.  It’s was all about Greed and delusion.   Who knows what leverage lurks out there today.
On August 19, 2007, prior to the 50% crash in the stock market and decimation of the housing industry, I wrote:
A
 Perfect Storm Looms

    The perfect storm in our financial markets is looming.

….It will take a heroic international effort to avert a meltdown of  huge magnitude…

….Trading in everything may have to be stopped until some sort of sanity is restored

….This can get real ugly. No one has a handle on the leverage amassed in  derivatives 

 ….No one has a true handle on how precarious the situation out there is, and that uncertainty  feeds on itself, prompting increased selling…With few buyers, stocks tank.

…Only when a cauldron of fear begins to boil, do you have a market that is reasonably safe to invest in.
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      Actually, this is a condensed to save space here, but I knew leverage at all levels of the economy was running rampant and a crash in the stock market was imminent, and with  home prices through the roof, the binge was unsustainable.  But I wasn’t sure what would trigger the carnage.
No one at the time could explain the complex derivatives that  the banks and the Street had created to maximize commissions and facilitate the writing mortgages just as no one can explain the vast overvaluation of many stocks today.
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BOTTOM LINE:
The simplistic Buffet Index  of stock market cap to GDP has never, ever, reached this level.
This is like sprinting down a very steep hill.  You can’t stop, turn around, you just have to keep running hoping you don’t fall.
At some point the stock market will crash again, and then people will write books about what happened, why it was so obvious, how could anyone miss it.

We saw a 21-day 35% plunge in stocks in February-March earlier this year.
Unprecedented stimulus by the Fed and Congress headed off a CRASH and triggered a complete recovery in the stock market, but not in the economy which is struggling to avert a double dip.
        The Biden administration has a big Republican mess to clean up, just as President Obama was faced with in 2009 after the Bush administration.
He will not have the benefit of open-ended stimulus to prop the economy and goose stock prices.
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Big-name Growth Stocks Stabilizing:
The technical  risk of an imminent decline for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX),Tesla (TSLA), Google (GOOG), and Microsoft (MSFT) is no longer high. While fundamental developments may affect these stocks, they have stabilized for the time being, as COVID-19  is overwhelming optimism of a vaccine solution.    If their technical status deteriorates I will set new levels.
Vaccine stocks haven’t caught fire yet. New announcements of vaccine solutions will develop.

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Market Averages: Estimated Price Range for today only.
Resistance:
  DJIA: 29,400 ; SPX:3,575 ; COMP:11,780 ;QQQ:289
Support: DJIA:28,780; S&P 500:3,515; Nasdaq:11,650; QQQ: 284
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Wednesday November 11, 2020 (DJIA: 29,420)  Indeed – “It Is All About Politics “

The economy is a mess, our democratic representative constitutional republic
diminished, many of the ten million Americans infected with COVID-19, 238,000 dead, would not be so with a federal effort to combat it, our nation divided, no thanks to this administration. Could an foreign adversary do more damage ?
      The people have spoken, but the incumbents aren’t listening – Un-American !
As American as the new Administration is, as determined as it is to clean up another Republican mess, as was done in 2009 after the Great Recession and Bear Market, it will not be easy.
       Gridlock ?  Bet on it.  Obstruction to progress ?  Bet on it.
Much as everyone would like to achieve normalcy, it won’t happen.
So what does politics have to do with our stock market today ?
       EVERYTHING !
Acceptance of defeat and the passing of the baton to a new administration
has always been smooth – it is not only the way our government works, a nation of laws, not doing so puts our nation at grave risk.
This great American  experiment in governing works, it’s brilliant and brave, but relentless attempts to undermine its system will destroy it, yielding to chaos, untethered violence, and anyone with a semblance of intelligence knows what that means for the economy, stock market and the future of our country.
Can’t happen  ?
I don’t think so, just too many people out there to say “NO !”

BOTTOM LINE:
          Hopefully, our economy can avoid another dip.  Bear in mind, the rebound we have seen since the COVID crush was all about unprecedented stimulus.
With a new administration taking over, Republicans will not want  the economy to benefit under the Biden administration.
The economy will be flying solo – BEWARE !
           I have been doing this since 1962, have been bullish and bearish with exceptional timing.  This is a phony economy, phony stock market a phony administration until January 20.
           I  believe the vote screamed – no more incompetence, projection, deviancy down,  confirmation bias, Dunning-Kruger Syndrome , we demand
solutions and demand them now.
A lot must happen before it is safe to load up.
It is a stock pickers market. The Street will sell the big-name growth stocks down to a point they are screaming buys.   Vaccine plays will come and go.  Badly COVID-crushed stocks will recoup “some” of their losses.
But a “close-your-eyes-and-buy”  market is not here.
RISK of another bear market ?   I give it a 70-30.
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There is more than one way to attack a solution to a disease and that is where we will see a host of releases in coming months.
Estimated Price Range Today:
Pfizer (PFE: 38.68)   39.75 – 38.25
BioNTech (BNTX: 112.76)  116 – 110
Moderna (MRNA: 76.05)    78 – 75
AstraZeneca (AZNCF:113.36)  116 – 113
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Price ‘risk’  near-term :
Facebook
(FB)    252 – 258 – 252
Amazon (AMZN: 2,900 – 2,850
Apple (AAPL)  108 – 104
Netflix (NFLX)  450 – 440
Tesla (TSLA)  340 – 330
Google (GOOG) 1,600 – 1,575
Microsoft (MSFT)  200 – 198
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Market Averages: Estimated Price Range for today only.
Resistance:
  DJIA: 29,768 ; SPX: 3,586 ; COMP: 11,725 ;QQQ:288
Support: DJIA:29,400 ; S&P 500:3,545 ; Nasdaq:11,560 ; QQQ:284
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Tuesday  November 10, 2020 (DJIA:29,157)  “Dynamic Leadership Change”    I don’t want to get sucked into the COVID-19 vaccine timing derby, but the Pfizer (PFE) – BioNTechSE (BNTX) news release yesterday before the open suggested to me other companies were on the cusp of news releases and this dynamic duo wanted to be the first.
Put enough raw meat on the floor for these stellar research firms to chew on and fortunately they’ll waste no time grinding out results.  There will be others.
There is more than one way to attack a solution to a disease and that is where we will see a host of releases in coming months.
Estimated Price Range Today:
Pfizer (PFE; 39.20)   44 – 39
BioNTech (BNTX; 104.80) 118 – 102
Moderna (MRNA:77.74)    88 – 77
AstraZeneca (AZNCF:108.20)  116 – 109
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That said, this group will upstage the popular COVID beneficiary stocks which I warned about yesterday (Apple (AAPL), Microsoft (MSFT), Facebook (FB), Netflix (NFLX), Google (GOOG), Amazon (AMZN) to mention a few.
Their prices will be deflated to erase the euphoric fat gained as the only game in town, but they are not going away. Even so, portfolios will switch to vaccine stocks and COVID recovery stocks.  Price ‘risk’ is:
Facebook (FB)    252 – 258
Amazon (AMZN: 2,600 – 2,650
Apple (AAPL)  98 – 105
Netflix (NFLX)  425 – 430
Tesla (TSLA)  315 – 320
Google (GOOG) 1,558 – 1,600
Microsoft (MSFT) 195 – 200
BOTTOM LINE:
       I don’t like buying explosive opens
. I don’t like running with the herd, especially if there is a cliff anywhere nearby.
We are knee-deep in a pandemic and too early for a coming out party.
While the rebound from a severely depressed economy may be enough to prompt the NBER to announce the recession that started in February is over, our nation, the world, will be struggling from COVID’s impact for many months.
If this is a double-dipper for the economy, it will also be one for the stock market.
It may well be anyhow.   The transition in Washington will be tenuous with a slow return to normalcy.
In its simplistic self, the Buffet Index of overvaluation for the stock market has never been higher. A ratio of stock market capitalization to GDP at around 181% is trumpeting  – take a hike.

Market Averages: Estimated Price Range for today only.
Resistance:
  DJIA: 29,580; SPX: 3,615; COMP:11,500 ;QQQ:282
Support: DJIA:28,860; S&P 500:3,540; Nasdaq:11,236 ; QQQ:272

 

Monday November 10, 2020 (DJIA: 28,323) “SELL the Open”
     Pfizer (PFE) and BioNTechSE (BNTX) just announced   a vaccine candidate that has demonstrated evidence of efficacy against COVID-19 indicating a vaccine efficacy rate above 90%.
  The company expects to produce  up to  50 million doses in 2020 and up to 1.3 billion doses in 2021. Both are working to prepare safety and manufacturing data to submit to the FDA to demonstrate safety and quality.
Obviously, this is great news.  I do not understand the haste in its release before final tests are complete unless other companies are on the verge of announcing a vaccine.
BOTTOM LINE:

As noted Friday, The Buffet Index of stock market valuation has never demonstrated a greater overvaluation of stocks.  Last week, I attributed last week’s rally to the Street’s relief that a lopsided Democratic victory wouldn’t result in  a major change, i.e. gridlock was preferred.

Now I suspect, It was known that this release was coming.
      I am bullish on the ability of the drug industry to rise to the occasion and especially bullish on the choice voters made last week.
      Euphoria will drive stocks higher at the open. The NBER may shortly announce the recession is over based on the sharp rebound from Q1 and Q2 depressed lows, but recent data suggests otherwise..
But a lot of damage has been done on top of an economy that  in its 11th year was ready for recession without COVID.
Short covering will add to panic buying at the open. I view this as an opportunity to raise enough cash to protect one’s portfolio in the event this is

a fake out.
         The beneficiaries of  COVID’s shutdown are vulnerable,  Apple (AAPL), Microsoft (MSFT), Facebook (FB), Netflix (NFLX), Google (GOOG), Amazon (AMZN) to mention a few.

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Friday November 6, 2020 (DJIA: 28,390) “Buffet Overvaluation Index Never Higher”

     The stock market soared Wednesday and Thursday when it became clear there was not going to be a lopsided Democratic victory. The Street  was settling for political  gridlock for at least two years.
That aside, nothing has changed for the better either in the economy or with COVID.
 BOTTOM LINE:
      This rally is a gift for investors to sell down to a level that discounts their tolerance for loss.
Simply stated, the Buffet Indicator, a ratio of stock market’s total market value to the  GDP has soared to new all-time high of 181%, a level far exceeding any ever achieved, greater than  the year 2000’s  159%, greater than the high of 118 reached before the 2007-2009 Great Recession.
Our nation’s economy is struggling to climb out of a recession. It may technically do that briefly  as a result of its sharp rebound from severely depressed Q2 and Q3, but I suspect it will once again plunge as economic dominoes continue to tumble.
In its simplicity, this indicator is screaming-  Stop Buying – Sell.
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Monday November 3, 2020 (DJIA: 26,501) Party Over, Rally a Trap, Worst Yet to Come”
A Biden win means a lot of painful damage control.
A Trump win means more damage.
Either way, I see a worsening of the recession and another bear market.
At these lofty levels, the stock market does not even closely  reflect the damage done over the last four years.
The stock market is vastly overvalued based on time-tested measures of value and buoyed by government stimulus and a handful of gigantic corporations whose market caps have distorted the market averages and given a phony reading  of values.
It is overvalued, because Wall Street  likes it that way and wants the party to continue indefinitely.  Not Going to happen. Fed bubble #1 burst on February 12, Fed Bubble #2 burst on October 12.
       The Fed has no reason to prop the market after tomorrow. Congress has no incentive to pass any more stimulus packages.
Covid-19 is running wild in its third major surge of infections threatening to crush an economy already on the ropes.
       If the market were down 35% from here, I would be bullish as Hell. But that’s the disconnect, it is 10% down from all-time highs and has not discounted any negatives.
BOTTOM LINE:
Look for brief rally starting today after last week’s drubbing. New buying risky, especially chasing stocks at the open. It looks like the tech stock craze of invulnerability has been shattered, rallies from here  give investors a chance to lighten up.
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Market Averages:  Estimated for today only.
 Resistance:  DJIA: 27,001; SPX:3,329 ; COMP: 11,145;QQQ:274.5
Support: DJIA:26,400 ; S&P 500:3,260  ; Nasdaq:10,500 ; QQQ:271
Note: News of a failure to reach a bill would hammer stocks.
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The news sensitivity of this market complicates picking support and resistance levels –  Changes in broker ratings and earnings reports/projections add to the difficulty. Technical-only estimates of short-term price ranges  for today are listed below.
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Today’s est. range:
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FB:
     273 -263
AMZN: 3,107 – 3,045
AAPL: 111.8 – 109
NFLX: 486 – 475
GOOG: 1,666 – 1,625
TSLA:   411 – 390
MSFT: 2.7.6 – 202
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Again, These  are “technical chart reads.” I am not checking  earnings, news, buy/sell recommendations. These levels change frequently.
Some markets are easier to read than others. I like a rough and tumble market, that’s where the opportunities are albeit risks.  That’s where “wild bid” opportunities crop up, where a bid  set well below the market for a stock can be nailed for a turn that occurs in just a fleeting second.  These are usually not at conventional support levels, but a bit below those levels. If the stock doesn’t trip it, a trader looks for the next one.  The key is cut losses short. Sometimes partial positions work better than an “all-in” strategy, especially in a news whipsaw market where the market gets jerked around by conflicting news releases.
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Friday October 30, 2020 (DJIA:26,501)  “Flash Crash Risk Rises – Nov. Buy – Lower Prices”
A chaotic month, a flash crash, but a great buying opportunity at much lower prices.
According to the Stock Trader’s Almanac, November ranks first in months to buy  for good results over the next six months.
      Yesterday’s rebound was more about a technical reaction to the plunge over the last four days than to the stellar Q3  GDP report which has been expected for weeks.  While compared with a severely depressed Q2, an annualized gain of 33.1%, it was buoyed by unprecedented government stimulus, which cannot be expected in future quarters.
Uncertainty LOOMS, the VIX is surging to reflect angst ,and small wonder,
the next 10 weeks stand to be racked with chaos, inept governance, uncertainty about WHO IS IN CHARGE.
If Trump loses he will be vindictive and out of control,  and nothing can be done about it. If he wins, the nation will be thrown into a depression, stock market crash, civil unrest and the biggest challenge to the survival of our democratic representative constitutional republic since the CIVIL WAR.
BOTTOM LINE:
With COVID on a tear, odds strongly indicate that  the economy will tank again triggering another flash crash, this one featuring a series of plunges, rallies and plunges.   Initially, I see the market averages hitting the levels below before a short-lived rally.
DJIA: 25,000
S&P 500: 3,050
Nasdaq Comp.:10,150.     

Yesterday’s  “Trader’s Hit-n-Run Buy in early trading should have served readers well, but take the profit and wait for another opportunity..   Expect a test of those lows today.

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Market Averages:  Estimated for today only.
 Resistance:  DJIA: 26,450; SPX:3,285 ; COMP:11,150 ;QQQ:275
Support: DJIA:25,790 ; S&P 500:3,200 ; Nasdaq:10,290 ; QQQ:269
Note: News of a failure to reach a bill would hammer stocks.
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The news sensitivity of this market complicates picking support and resistance levels –  Changes in broker ratings and earnings reports/projections add to the difficulty. Technical-only estimates of short-term price ranges  for today are listed below.
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Today’s est. range:              30-Day Risk
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FB:  284 – 268

AMZN: 3,243 – 3,095
AAPL: 117 – 110
NFLX: 521 – 490
GOOG: 1,672 – 1,630
TSLA: 414 – 398
MSFT: 207 – 199
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Again, These  are “technical chart reads.” I am not checking  earnings, news, buy/sell recommendations. These levels change frequently.
Some markets are easier to read than others. I like a rough and tumble market, that’s where the opportunities are albeit risks.  That’s where “wild bid” opportunities crop up, where a bid  set well below the market for a stock can be nailed for a turn that occurs in just a fleeting second.  These are usually not at conventional support levels, but a bit below those levels. If the stock doesn’t trip it, a trader looks for the next one.  The key is cut losses short. Sometimes partial positions work better than an “all-in” strategy, especially in a news whipsaw market where the market gets jerked around by conflicting news releases.
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George Brooks
Investor’s first read.com
brooksie01@aol.com
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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