Big Test !

Investor’s first read Daily edge before the open

DJIA: 18,076                                   

S&P 500: 2,099

Nasdaq  Comp.:4,982

Russell 2000:    1,252

Thursday,  March 26, 2015    9:12 a.m.

  • Another sharp plunge – is this the beginning of a major correction ?
  • Based on past performance – one would expect a sharp rebound in a day or two.
  • The swing factors defy an answer.  Here’s why:

    The Street is insanely addicted to every move, suggestion, and hint from the Fed about its first bump in interest rates. To-date, sluggish reports of any sector of the economy prompted buying, since it reduced the likelihood the Fed would raise rates soon. Strong reports prompted a drop in the market.

    However, yesterday’s 300-point drop in the DJIA was attributed to a weak Durable Goods report and concern that the economy may finally be weakening.  Go figure.

CONCLUSION:

    I don’t now, nor have I felt for years, that the Street has a consistent approach to assessing risk/opportunity. Markets in the past have flourished with interest rates at much higher levels, yet a bump up, however slight, is expected to spook the Street.

    Yes, but what about interest rates ?  Aren’t the odds of a near-term bump in interest rates less if the economy falters ?  Be prepared for the Street to do an about face.

    What the market needs is for that first bump up.  Most likely the market will plunge before or in response to that bump, then odds favor a rebound. We had this senseless behavior with “taper” and the Street shook it off once it became obvious the economy and stock market would not crash when the Fed began to cutback on bond purchases.

SHORTTERM:

     One of the best ways to sense direction in the market is to assess its ability to move in the opposite direction to the present trend.  In this case, how robust will the next attempt to rally be ?  Unimpressive and  strained suggests more downside; robust suggests a turn.

     April 1 marks the beginning of the six month (April-November) period that has historically underperformed the six months between November and May. The beginning of that slowdown has been more consistent than the follow through which has been interrupted by frequent and substantial rallies.

TODAY:

Expect a spike down at the open possibly breaking below the March low of DJIA 17,620 (S&P 500: 2,039) to DJIA 17,537 (S&P 500: 2,032) before an attempt to rebound.

Resistance begins at DJIA: 17,837 (S&P 500: 2,074).  The Nasdaq Comp will may break the 4,842 March low before an attempt to rebound from 4,817.

George Brooks

Investor’s first read

A Game-On Analysis, LLC publication

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Note: I discontinued my daily – before – open publishing of Investor’s first read on November 5, 2014, after 6 years (1.600 posts).  Future publishing will be on a less frequent basis and not always before the market opens. In the interim, I will publish as I see necessary as I craft a new format.

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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 decisions in keeping with their tolerance for risk.

 

 

 

 

 

 

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