Bulls Need to Blow Through Resistance Now

Investor’s first readDaily edge before the open

DJIA: 17,630
S&P 500: 2,093
Nasdaq  Comp.5,089
Russell 2000: 1,224

Wednesday,  July 29, 2015   8:15 a.m.

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TODAY :

     No press conference following the FOMC meeting tomorrow at 2:00 p.m., so the only good news that can be expected is that which the Street parses out of language in the Fed’s report.

     Stock Index Futures are not signaling a big move in the market either way, which is OK since the market posted healthy gains yesterday.  Resistance will begin to show up on any move higher from these levels.

      The Bulls will have to be “reaching” for stocks here, aggressively taking out sell orders at higher prices in order for the market to signal the sell off between July 20 and 27 is over.

       No room for rally failures.                                                            

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RESISTANCE today starts at DJIA:17,717 ;  S&P 500: 2,103 ; Nasdaq Comp.:5,113

SUPPORT today: DJIA:17,576; S&P 500: 2,085; Nasdaq Comp.: 5,070.

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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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  • STATUS OF MARKET: Market is in correction mode after sharp run up where it hit a wall. 
  • OPPORTUNITY: Volatility has set in and overhead supply is building
  • 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:  Big week for economic reports plus FOMC meeting and a report (no press conference) at 2:00 Wednesday.
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SUMMARY  (No change)

     The biggest factor here is the U.S. economy.  Will it rebound from its reported Q1 slump, which most likely  was distorted by weather, oil prices, the impact of a strong US dollar, even seasonality ? So far, results are mixed. Yesterday’s news indicates softness in chain store sales and Consumer Confidence, but a bit of strength in PMI Services  and good strength in Richmond Fed Manufacturing.

     Recession does not look like a real risk, so much as a “pause” in the economy.

      FactSet projects a year/year decline of 4.5% for Q2 this year, or a 2.1% drop in Q2 alone. The forward 12-month P/E ratio for the S&P 500 is 16.5, above the 5-year average of 13.9 and 10-year average of 14.1.  There are disappointments, including Materials, Energy, Industrials, Telecom, Healthcare, Tech and Utilities, according to FactSet research (www.factset.com)  

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THE FED:

      FOMC meeting this week with a report (no press conference) on Wednesday at 2:00 pm.

      The guessing game continues – Will the Fed bump interest rates up in September, or later ?

      Obviously, their decision will key on the strength of the U.S. economy where housing is taking the lead and now consumer expectations are soaring.

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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  July 27,  a reasonable risk is 17,357; a more extreme risk is 17,083 The upside potential is has dropped with the market’s inability to follow through last week and is now 17.898.

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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.

-Greece:  I DON’T  THINK GREECE WILL BE IN THE EURO A YEAR FROM NOW

Note: Source of economic data

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

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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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