Bulls Chewing Away at 2015 Resistance

Investor’s first read – Daily edge before the open
DJIA: 17,883
S&P 500: 2,102
Nasdaq Comp:5,156
Russell 2000: 1,204
Wednesday: Dec. 2, 2015 8:49 a.m.
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TODAY
This level of resistance at DJIA 18,000 (S&P 2,100) is formidable, and the bulls will be challenged to blow through it. Yesterday’s surge was a start.
The Fed will announce its decision about a bump in interest rates on the 16th. While the Street may be reluctant to commit too heavily before then, the ability of stocks to move higher will depend on two things.
If this week’s economic data is significantly weak, talk of the Fed delaying its bump in interest rates may resurface, giving stocks a shot in the arm.
If the economic news is strong, the market may still move ahead, since the Street seems resigned to an announcement of a bump in rates on Dec.16.
Even if the market averages have difficulty moving ahead, the stocks of companies expected to do well in 2016 can outperform.
A year-end rally could be played if your timing is exceptional. Stocks that were losers in 2015 could be winners in 2016.
Fed Chief Janet Yellen will speak at 12:25 today. Obviously, every word she says will be parsed for confirmation that the Fed will bump rates this month.
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SUPPORT “today”: DJIA: 17,777; S&P 500:2,088; Nasdaq Comp.:5,124;
RESISTANCE ‘today”:DJIA:17,971; S&P 500:2,115; Nasdaq Comp.:5,179;
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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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Economic reports were mixed yesterday with the PMI Manufacturing and ISM Manufacturing Indexes in November slowing further. Construction Spending was up a solid 1.0 pct. in October, and Motor Vehicles sizzled at an annual rate of 18.2 million.
The ADP Employment report hit at 8:15 today with new hires for November coming in at 217,000, a bit better than projected. (See mam.econoday.com for details for the week)
The CPI Core index is inching up close to the Fed’s 2.0 pct. trigger but the Core PCE (Fed’s choice) index is lagging. Even so, the Street is expecting the Fed to announce a bump in interest rates Wednesday Dec. 16.
Factory data appears to be stabilizing, though housing has suddenly tapered off.
Key Fed officials will speak this week: Lockhart 8:10 a.m. Williams 11:00, and Fed Chief Yellen 12:25 Wednesday; Mester at 8:30 a.m. and Yellen (again) at 10:00 a.m. Thursday, Harker at 10:15 Friday, Bullard at 3:45 p.m. and Kocherlakota at 4:10 Friday.
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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ELECTION YEAR MARKETS
Pre-presidential election years have a record of being the best of the four-year election cycle with presidential election years running a close second. But the eighth year of a two-term presidency is the exception with the S&P 500 losing an average of 10.9% going back to 1901.*
This supports my expectation of a correction in January setting the precedent of a volatile year for stocks in 2016.
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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 November 19, 2015, a reasonable risk is 17,580 a more extreme risk is 17,436. Near-term upside potential is 17,967
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 STATUS OF MARKET: Bullish but “at risk” of a correction, especially Fed-based
 OPPORTUNITY: RISK: Risk increases with higher market, but light on the Street is GREEN in spite of negatives.
 CASH RESERVE: 25% – 45% depends on tolerance for risk.
 KEY FACTORS: Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; Stimulus Europe/China a catalyst !!
 CONCLUSION: Suddenly, odds of a December bump up in interest rates has increased dramatically. Over the years, the market has sold off when it appeared that an increase was imminent. It did not do so after the announcement Friday, but did on Monday as the Street began projecting the timing of subsequent rate increases in 2016 – 2017.
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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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