Bulls Better Step In

Investor’s first read Daily edge before the open

DJIA:  16,330
S&P 500:  1,952
Nasdaq  Comp.;4,796
Russell 2000:   1,153

Friday:  Sept 11,  2015   9:11 a.m.

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SUMMARY:

      I really don’t think the Street knows what the market should do. That’s the price for snuggling up too close to the Fed, and focusing too closely on whether a company “beats” guidance/projections without regard for what a company’s outlook will be a year from now.

      Will the Fed, or won’t the Fed raise interest rates at its next meeting ?

      This game has been played in overtime for too long. It has gotten so bad, the Street welcomes bad news, since it assures it a rate increase is not imminent.

       The market should drop either in anticipation of  a Fed bump in rates, then rise, or drop after the announcement, but only briefly (minutes/hour) then rise.

TODAY:

       Stock-index futures indicate a soft open, which threatens trigger another leg down.  One-day reversals have been so frequent.  Five of the last six days have reversed the prior day’s trend.

SUPPORT today: DJIA: 16,221 ; S&P 500:1,939 ; Nasdaq Comp.:4,775.

Should we get a reversal of the open today, look for RESISTANCE to start at

DJIA: 16,513; S&P 500: 1,973; Nasdaq Comp.: 4,837

COMMENT:

      This kind of indecision is what you would expect from novice investors.  But then this isn’t about investing is it ?  This is a game of  “gotcha “! – BIG money moving huge positions in a millionth of a second to scalp a fraction of a point.

       Math majors fresh out of school designing algorithms  in lame effort to beat the market.  Why can’t there be a separate arena for these behemoths to joust ?

       That thought is as unreasonable as the idea of algorithms beating the market consistently.  There are just too many variables whose weighting changes too frequently to quantify the next move in the market.

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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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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” (0.1498588) 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  September 8, 2015,  a reasonable risk is 15,827; a more extreme risk is 15,713. Near-term upside potential is 16,930.  Note: A drop below DJIA 15,713  would be very bearish.
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NEWS ENVIRONMENT    

        The following news has been  a contributor to recent market weakness, though most of these issues have been with us for weeks/months. 

-a flawed trading system allowed another flash crash with the DJIA dropping more than 1,000 points at the open Aug. 24. July business investment is picking up.

-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. The latest comment was by N.Y. Fed’s Dudley who said an increase in Sept. is “Less compelling”.

-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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  • STATUS OF MARKET: Bullish but in a correction  into the fall.
  • OPPORTUNITY: Volatility has set in, market has rebounded from August’s “flash crash”  and is approaching an area of resistance.
  • 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 ?   An updated Q2 GDP reported came in at plus  3.7% (ann. rate) up from 2.3% initially reported.   Recession does not look like a real risk, so much as a “pause” in the economy.     

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Note: Source of economic data

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

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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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