Bulls Hoping For a Boost From The Fed

Investor’s first readDaily edge before the open

DJIA: 17,483
S&P 500: 2,053
Nasdaq  Comp:4,984
Russell 2000: 1,156

Tuesday:  Nov. 17, 2015   9:03 a.m.

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      Yesterday’s rebound was primarily technical and can be expected to run into resistance in coming days as stock prices approach the level from which they plunged three days ago.

      From there the market needs a boost from the Fed, probably from comments that would raise doubts about a December rate increase.  The Fed’s William Dudley speaks Wednesday at 7:30 a.m., Dennis Lockhart on Thursday at 12:30  p.m., and James Bullard Friday at 9:00.  All three have indicated a preference for a rate increase.  It would be seen as bullish if they back off of that position, or hedge referring to recent economic reports that suggest a weakening in the economy. If they support the current belief that a December bump in rates is likely, it would be seen as bearish.

TODAY:

      I have read some impressive projections for corporate earnings  looking out to 2016 and 2017, but also concerns for top line growth. Without the latter, the bottom line will have trouble, now that so much “engineering” has been expended.

      With so much emphasis on the timing of a Fed increase in interest rates, it is hard to get a read on what value the Street is placing on earnings, valuations, the economy here and abroad, and international hotspots.

       There is a risk of another leg down and an ugly one at that, but that will have to be triggered by technical factors, buyers heading for the sidelines and a sudden imbalance in selling.

       The August/Sept crunch and recovery can provide enough support for another range-bound market with the DJIA trading between 17,200 and 18,000 (S&P 500: 2,020 and 2,115).      

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SUPPORT “today”: DJIA: 17,433; S&P 500:2,047 ; Nasdaq Comp.:4,971

RESISTANCE “today”: DJIA:17,587 ; S&P 500:2,065 ;Nasdaq Comp.:5,278

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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” (0.149677) 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 13, 2015,  a reasonable risk is 17,117 a more extreme risk is 16,856. Near-term upside potential is 17,630
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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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