Big Shift in Sentiment Afoot on Wall Street ?

Investor’s first readDaily edge before the open

DJIA:  16,790
S&P 500: 1,979
Nasdaq  Comp.: 4,748
Russell 2000: 1,133

Wednesday:  Oct. 7, 2015   9:09 a.m.

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     Out of nowhere, oil prices and stocks have emerged from ashes to hog center stage.  How so ?   With major global producers pumping full throttle, wasn’t $20 oil just around the corner ?

      It’s a matter of extremes. When conditions simply can’t get worse, they tend not to.

      “With an unrelenting barrage of bad news on the oil sector, these stocks have got to be approaching the ‘wrung out’ phase…..at some point everyone just bails and that marks the turning point.”  Investor’s first read, Sept. 24, 2015.

      After a relentless barrage of sour news on the industry and plunging oil and stock prices, we are suddenly seeing a change of heart.

      “Oil is like a coiled spring….risk appetite is increasing across markets, which were overly bearish before… Oil is rallying  amid signs a U.S. glut may be easing, while global demand for crude grows.” Commerzbank AG.

     Could Hollywood’s best have orchestrated the plunge and  rebound better ?  Who got squeezed out  at the bottom; who was let in at bargain prices ?

     Best to do your own thinking and not listen to anyone.

TODAY:

     As for oil, the bears may not be done. Another round of negative news may be floated, but it appears the bears are on the run.

     As long as the Fed is mum, this rally has a chance. A solid base has been formed, clearly strong enough to support higher prices.

     We have seen oil stocks crushed by dire forecasts only to stabilize and begin to recover in face of a perplexing change in expectations.

      U.S. and global economic lethargy has put a lid on this bull market.  If that changes suddenly like it did for the oil industry, we could see a big leg up in the market.

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RESISTANCE today:  DJIA: 16,916; S&P 500:1,994; Nasdaq Comp.:4,784

SUPPORT today:  DJIA: 16,703; S&P 500: 1,969; Nasdaq Comp.:4,721

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NOTE:  There is no FOMC meeting scheduled for November, and no press conference scheduled for October. If a press conference is suddenly scheduled for October, it will be a tip off to an announcement of a rate increase, likewise  for a meeting/press conference is scheduled for November.     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>    

WHAT THE FEDS SHOULD DO:

      What the Fed should do is what all of us investors, analysts, etc who have been in this for a while have learned to do  and that is to come out and admit they erred by inaction in the past and now with  implying a rate increase was likely by year-end. “We were wrong” –  Say it !  The numbers don’t justify it now.  Then  add, “When the numbers and international risks justify it we will raise rates, not before.”

      The Street is as much to blame as the Fed. It’s all about the Fed – Will it ? Won’t it ?  The Street  should get back to basics – the bigger picture – earnings one year out, not this asinine quarter-to quarter stuff; the big economic picture here and abroad, U.S. Governance, Corporate responsibility.

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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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” (0.149677) 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  October, 2 2015,  a reasonable risk is 16,260 a more extreme risk is 16,155. Near-term upside potential is 17,164. 
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  • STATUS OF MARKET: Bullish but “at risk” of  a bear market.
  • OPPORTUNITY: Volatility has set in, market has rebounded from August’s “flash crash”  but will likely drop to a lower level.
  • 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:  Encouraged by the prospect the Fed won’t raise interest rates this year due to softness in the economy, the stock market has rebounded from a support level established after the August 24 “flash crash.”
    Note: Source of economic data

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

*Stock Trader’s Almanac ( New edition should be out – get it !)

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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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