Bulls to Face-Off With News Whipsaw

Investor’s first readDaily edge before the open

DJIA:  17,230
S&P 500: 2,033
Nasdaq  Comp:4,905
Russell 2000: 1,164

Tuesday:  Oct. 20, 2015   9:09 a.m.

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      Housing led the crunch down in 2007 – 2008, it is  now a leader in a reluctant and aging economic recovery.  The Housing Market Index for October sported strong gains in October. The survey reflects sentiments for the economy and housing industry.  Housing starts for October jumped 6.5%, though Permits slipped 5.0%.

MBA Mortgage Apps/Refi’s come at 7 a.m. Wednesday, and Existing Home Sales and FHFA House Prices on Thursday.

     It will take more than this to convince the Fed to begin raising its benchmark interest rate before year-end.

     But, it would only take the perception that the Fed will act to trigger a sharp, though limited correction.

     As I see it, the magnitude of a correction following  an interest rate bump would depend on what Wall Street’s computers have been programmed to think.

     If they are programmed as rigidly  to sell on an increase as they are to buy, investors are in for a drubbing.

     The economy and stock market should be able to co-exist with slightly higher rates if the trade off is a stronger economy.  If the Street’s computers are not programmed to see it that way then common sense makes no sense at all.

      That said, I would expect a sharp sell off on the announcement that the Fed is increasing rates, followed by a rally. The latter depends on whether the Street’s computers are programmed to think like a rational human being.

       TODAY:

      The market will open mixed today.  As noted yesterday, the key is to watch if the bulls use any weakness to buy.  Without a jolt on the news front, the market should push higher.
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SUPPORT today:  DJIA: 17,175 S&P500:2,029; Nasdaq Comp.:4,874

RESISTANCE today: DJIA: 17,347; S&P 500:2,048; Nasdaq Comp.:4,924

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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.     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 

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  October 14, 2015,  a reasonable risk is 16,793 a more extreme risk is 16,527. Near-term upside potential is 17,137. 
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  • STATUS OF MARKET: Bullish but “at risk” of  a correction, especially Fed based
  • OPPORTUNITY: RISK: Above average with news sensitive market.
  • CASH RESERVE: 25% – 45%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION:  Encouraged by the prospect the Fed won’t raise interest rates this year due to softness in the economy, the stock market has rebounded from a support level established after the August 24 “flash crash.” It is now beginning to probe into an area from which it broke down in August where the upside should be more challenging.

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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 ( New edition should be out – get it !)

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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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