Big Test for Rebound From Monday’s Lows

Investor’s first read Daily edge before the open

DJIA:  16,654.
S&P 500:  1,987
Nasdaq  Comp. 4,812
Russell 2000:   1,153

Friday:  Aug. 28, 2015   9:07 a.m.

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CONCLUSION: 

     The rebound that started Monday after a bloodbath at the open has been tested every day since.  On each occasion, buyers stepped in to turn the market back up.

      With the major market averages recouping two-thirds of the ground lost since the 11.7%, three-day plunge in the DJIA Monday, sellers can be expected to hit the market.

      This is the most serious test so far this week. 

       The stock market can go into a freefall, another leg down that takes the averages well below Monday’s low, or it can notch down over the course of four or five days to test its recent lows..

       The bullish alternative would be for buyers to step in once again and run stocks higher by mid-afternoon.

       Odds favor a notch down test of Monday’s lows.  The first 35 minutes should give us a read whether buyers are waiting for a pullback.

        I have still not ruled out a September/October bottom.

SUPPORT today:  DJIA: 16,543; S&P 500: 1,973; Nasdaq Comp.: 4,778.

RESISTANCE today: DJIA: 16,713 ; S&P 500: 1,994 ; Nasdaq Comp.:4,836.

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NEWS ENVIRONMENT    

        The following news was a contributor, though most of these issues have been with us for weeks/months.  A breakdown to  a “comfort level” was justified, but not that extreme.  The system is still broken.

-Chinese stock markets worst drop since 2007,  currently rebounding

-European stocks on verge of bear market (Germany’s DAX off 20%)

-U.S. stocks recovering from ugly crunch

-Commodities at 16-year low, but oil stabilizing.

-currency meltdown

-No one has a clue when the Fed will bump interest rates, including the Fed

-Brent oil and WTI oil rebounding from lows

      NOTE: Some of the Street’s pundits are arguing that this market behavior is unreasonable since the U.S. economy is doing well, if not great. Bear in mind, the stock market has historically been an early warning signal for the beginning of a recession, leading by as little as two months and as much as  13 months.

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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: Bullish but in a correction  into the fall.
  • OPPORTUNITY: Volatility has set in, market reversed Tuesday after quick plunge and will be rebounding into resistance (again).
  • 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:  Having broken major support levels, the market is probing for a level that discounts uncertainties and negatives.
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SUMMARY 

     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.     

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My TECHNICAL ANALYSIS  of the 30 DJIA Companies:  (As of 8/21).

 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. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages,
     As of  August 19,  a reasonable risk is 16,228; a more extreme risk is 15,713. Near-term upside potential is 17,083.

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Note: Source of economic data

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

*Stock Trader’s Almanac

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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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