Bulls’ Lead – Ever So Slight

Investor’s first readDaily edge before the open

DJIA: 17,791
S&P 500: 2,084
Nasdaq  Comp.: 5,029
Russell 2000: 1,261

Tuesday, June 16, 2015   9:11 a.m.

SUMMARY

     Greece’s fiscal problems have depressed stock prices for two days, but failure to avert a default by June 30 when its debt payment of 313 euros ($354 billion) is due would have an unthinkable adverse effect on its country.  Expect a compromise and rebound in stocks.

     The BIG “Q” here is whether the U.S. economy will rebound from its Q1 slump and how robust that bounce would be.

      The Street is in a quandary. A sharp rebound in the economy would hasten a Fed bump up in interest rates, which to-date the Street has considered to be bearish.  A further slump in the economy would keep interest rates at all-time lows, which so far the Street thinks is bullish.

      However, the economy can only slump so far before the Street change heart and head for the exits.

       Last week’s employment and retail numbers were upbeat.  This week May Industrial Production and June Empire State Manufacturing were below forecasts, though the Housing Market Index beat estimates reaching a nine month high. While May Housing Starts slipped, permits for future construction surged to an 8-year high.

      The FOMC meets today with its report Wednesday followed by Fed Chief Yellen’s  press conference Wednesday at 2:30.

TODAY:

      Common sense says there will be a compromise in Greece and the Fed will not announce an increase in interest rates tomorrow. The market doesn’t always track common sense, but the odds are in its favor here.

      The market stabilized after yesterday’s early sell off, the Nasdaq and Russell 2000 indexes were very strong recouping most of the day’s losses, a good sign.

      In a number of ways, the market is overvalued. The question is how much more overvalued can it get before topping out ?

RESISTANCE today is:  DJIA: 17,907; S&P 500: 2,093; Nasdaq Comp.: 5,047.

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TRADING RANGE

     The four month trading range intact since February is (DJIA: 17,600 to 18,300; S&P 500: 2,040 to 2,130; Nasdaq Comp.: 4,856 to 5,100).

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ALERTALERTALERT, etc.

     The six months period between Nov. 1 and May 1 has historically been the best six months for the stock market.* The six months between May 1 and Nov. 1 has underperformed. Consistent as this seasonal pattern has been, it must be noted that opportunities to trade against these trends have occurred often.  Analysts and the press will make a lot of noise about this phenom in coming months –  be careful.

     The DJIA and S&P 500 are unchanged since April 30.
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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.
     As of  June 5, a reasonable risk is 17,763; a more extreme risk is 17,556 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,160.

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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
Q2 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.
Recent strength in employment and housing industry shifting concern from a weakening in the U.S. economy to enough strength to prompt an early bump up in interest rates.

Note: Source of economic data

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

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*Stock Trader’s Almanac

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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