Bulls MUST Step In NOW, or………….

Investor’s first read Daily edge before the open

DJIA:  16,284
S&P 500: 1,920
Nasdaq  Comp.4,620:
Russell 2000: 1,00

Thursday:  Oct. 1, 2015  9:12 a.m.

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      Bearish sentiment was jolted Tuesday and Wednesday as stocks stabilized and rebounded.

      Tuesday,  I gave the  market averages an outside chance of reaching   DJIA: 16,494 ;  S&P 500: 1,952; Nasdaq Comp.:4,738.  Tuesday  featured enough “churn” to stop the bears;  Wednesday was up  sharply  and today looks like it will get off to a good start. I accompanied that projection

        Fed Chief Janet Yellen spoke at 3:00 p.m. yesterday making what was perceived as  “hawkish” comment, noting that the economy’s improvement in recent years has been “significant.”  Well now, that was profound.  Come to think of it, she’s right. Now that the Fed is running on the fumes to make a decision, the focus is short-term – it needs upbeat data to raise rates.

       While the employment situation is upbeat, other indicators are soft, such as the Chicago, dropping sharply in September below the threshold 50 level.

The ADP Employment report came at 8:15 a.m. Wednesday and was solid with  with 200,000 new hires in September..  The Employment Situation report will come at 8:30 a.m. Friday.

       Q3 earnings will start to hit the Street in coming weeks along with adjustments in future estimates/guidance. I can’t see how they will make good reading, but stocks in general are down going into the report period, which helps (if you are long).  

  TODAY:     

        It may merely be a rally in a pronounced downtrend, but there is a chance the Aug. 24 – the present is an important turn upward. By all means, sit close to the exit, because it will only take a sharp plunge after a “rally failure” to reverse the up trend.

       The bulls need to see persistent buying-in-size from institutions to come off the sidelines.

       Rallies in a sharp downtrend or bear market tend to come and go quickly as buyers hit a wall then get trampled buy anxious sellers happy to have a chance to bail at higher prices, if only pennies.

        The market action since the Aug. flash crash has a chance of being the end to the carnage with double bottoms in the DJIA, S&P 500 and Nasdaq, but Not the Russell 2000 which slid below the Aug. 24 lows.

         We are approaching the beginning of the best time for owning stocks (Nov. – May),* but this is OCTOBER and all bets are off.

          For months I have favored a September/October bottom.  Maybe August beat me to it, maybe not.

          If the bulls are loaded for bear, they will waste no time buying on dips, at the market and at higher prices. A lot of stocks have been slaughtered and may be candidates for investors looking back wishing they had done some buying.

         That, combined with the need  for institutions  to put clients’ cash to work should be good reason to shop for bargains.

         If this is a major juncture, the bulls should step in. If they don’t, the market will have to find a level that attracts them  – in size, which does count.
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RESISTANCE “today”: DJIA: 16,401 ; S&P 500:1,937; Nasdaq Comp.:4,659.

SUPPORT today:  DJIA: 16,208; S&P 500: 1,907; Nasdaq Comp.:4,597

Note: most of the DJIA stocks are up in pre-market, except AAPL which  is taking 10 points off the DJIA.     

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NOTE:  There is no FOMC meeting scheduled for November, and no press conference scheduled for October. If a press conference is suddenly scheduled for October, it will be a tip off to an announcement of a rate increase, likewise  for a meeting/press conference is scheduled for November.

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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  September 28, 2015,  a reasonable risk is 15,586 a more extreme risk is 15,079. Near-term upside potential is 16,575.  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. 

-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

      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 “at risk” of  a bear market.
  • OPPORTUNITY: Volatility has set in, market has rebounded from August’s “flash crash”  but will likely drop to a lower level.
  • 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.
  •  

Note: Source of economic data

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

*Stock Trader’s Almanac ( New edition should be out)

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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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