Bulls Need a Spark to Move the Chains

Investor’s first read Daily edge before the open

DJIA: 18,040
S&P 500: 2,111
Nasdaq  Comp.: 5,082
Russell 2000: 1,249

Monday, June 2, 2015   9:11 a.m.

TODAY:

     If you stopped reading the financial pages three months ago, and started reading  again yesterday, you would not have missed much.

     The Bulls have held a slight edge, but only step in to buy  on dips in the market.

     The action appears to be a little more intense on Nasdaq and in the Russell 2000 stocks. Both closed near their day’s high yesterday after a rebound from early selling.

     Bulls need to push beyond resistance at DJIA: 18,130; S&P 500: 2,122; Nasdaq Comp.:5,101.

     Today’s support is DJIA: 18,010; S&P 500: 2,107; Nasdaq Comp.: 5,067.

WHAT ARE THEY THINKING ?

     I really don’t think the Street knows what to do.

     That’s what happens when buy/sell decisions key on unsound assumptions, i.e. the Street favors so-so (even soft) economic numbers in exchange for the Fed delaying a nominal increase in interest rates.

      If the economy cannot withstand slightly higher interest rates, rates coming off  these historically low levels, than  this economic recovery is dangerously fragile.

      Actually, I think there is the potential for a surprise reaction by the Street once the Fed bumps rates up. The resulting sell off will be short-lived and a surge in stock prices follow when the Street realizes that the smart money expects that the stock market and slightly higher interest rates CAN co-exist.

      In the interim, volatility will continue.

ECONOMIC REPORTS

     This is a  big week for reports on the economy. Yesterday Personal Income/Outlays; PMI Mfg.; ISM mfg.; and Construction Spend were reported as non-events.  PMI is still adversely impacted by the strong U.S. dollar.

     Factory Orders come today, the ADP Employment data, International trade, PMI Services, ISM Non-Mfg. on Wednesday; Jobless Claims Thursday and  the Employment Situation report and Consumer Credit Friday.

     With a pickup in U.S. housing, it would be nice if other sectors of the economy would pick up. That can happen if the economy rebounds from Q1’s slump.

     Oh, yes,  Greece will be in the headlines this week !!     

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ALERTALERTALERT

     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.
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My Technical Analysis of the 30 DJIA Companies:  

On occasion, I technically analyze each of the 30 DJIA stocks  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  May 29, a reasonable risk is 17,917; a more extreme risk is 17,660 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,260.  

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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
-Q1 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.
Concern that the U.S. economy is beginning to slump. This week is mixed.

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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