Break Out ? Break Down ?

Investor’s first readDaily edge before the open

DJIA: 18,080
S&P 500: 2,117
Nasdaq  Comp.:5,092
Russell 2000:    1,267
Monday, April 27, 2015   9:03 a.m.

CONCLUSION:

   Changes in projections and guidance for earnings going forward will be the driver for stocks near-term. So far, the market has held up better than expected in face of soft Q1 earnings.  That raises the possibility of  any changes upward being a catalyst for the market with the possibility of a blow out.

     Obviously, revisions beyond expectations on the downside would trigger a sell off.  The market is more likely to be surprised with better than with worse expectations in the coming six to 12 months.

     However, just about the time fears of a bump up in interest rates fades, here comes a host of economic reports this week. If good, worries will resurface. If soft, the Fed will remain on the sidelines.  Go to “mam.econoday.com” for a calendar.

FROM FRIDAY’S POST:
   Until last Thursday, the DJIA, S&P 500, the Nasdaq Comp. were locked in a three month trading range  (DJIA 17,600 – 18,200; S&P 500: 2,040 – 2,115; Nasdaq Comp.: 4,845 – 5,040). The Russell 2000 has been in an uptrend throughout this period.

    While the DJIA is still locked in this range, the S&P 500 and Nasdaq Comp., edged to new highs last week. 

     Expect volatility to continue. While the pattern favors the bulls, breakouts are often used to dump stocks, with yet another “shake of the tree” possible.
     Expectations for soft Q1 earnings have been a drag for weeks, but that may be changing, as projections are not panning out as negative as originally thought.
    
A 5.5% drop in Q1 earnings is now looking more like 4.5% according to some Street sources.
      If the Street starts to see an earnings  rebound in the second half of the year with a possible bounce in oil prices and slide in the U.S. dollar not penalizing big-name stocks, we will get a sizable breakout and a run in small company stocks.
     Technical Analysis of the 30 DJIA Companies:  

     On occasion, I technically analyze each of the 30 DJIA stocks  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.
     Currently, a reasonable risk is 17,687; more extreme risk 17,500; and upside potential: 18,157. Any further surge in the DJIA would require an upward adjustment in these “risk” levels.    

KEY EXTERNAL FACTORS:
Greece is again at risk of default.
-Yemen chaos may be cooling.
-Stock market bubble – China
-Q1 earnings for some companies will suffer from U.S. dollar’s strength and plunge in oil prices.
-Market still keyed on the Fed and it’s first bump up in interest rates, which with a slight softening in recent economic reports looks like it may happen later rather than sooner.
Concern that the U.S. economy is beginning to slump.

Note: Source of economic data

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

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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