Bulls Trying to Run the Table

Investor’s first read – Daily edge before the open
S&P 500: 2,091
Nasdaq Comp:5,142
Russell 2000: 1,183
Monday: Dec. 7, 2015 9:06 a.m.
Friday’s surge reinforces the odds of a year-end rally, and my expectation of a correction in January. .
The Street appears to finally accept a bump in interest rates Dec. 16, with enthusiasm, since the Fed has assured it that subsequent increases would be gradual
If the economy heats up faster than expected, the Fed may be forced to bump rates more and sooner than the Street expects, resulting in a major correction.
Currently, the Street expects up to four bumps in rates in 2016

There will be forecasts for 2016 in coming weeks I am not a big fan of annual forecasts – too much can happen in the interim. They can be exciting, after all wouldn’t it be nice to know what is going to happen a year ahead of time and especially with those lists of “10 Stocks for 2016” to cuddle up with !!
Safe to say, it will be a year of interest rate increases and political discourse.
The 2016 Stock Trader’s Almanac has some stats that are worth knowing for the year to come. While presidential election years are the second best of the four-year cycle (pre-presidential years –best), the eighth year of a two-term presidency has produced average declines of 10.9% for the S&P 500 going back to 1920.
Friday’s surge reversed Thursday’s ugly downer, paving the way for a follow through on the upside, a breakout above November’s peak (DJIA 17,977; S&P 500:2,116).
But first, a correction to Friday’s up move. Obviously, it would be very bearish if the market gave back all of Friday’s 2% gain. The Bulls should be stepping in at DJIA: 17,783; S&P 500:2,084 ; Nasdaq Comp.:5,124. If they do aggressively, the market should move up to DJIA:17,898; S&P 500:2,076; Nasdaq Comp.:5,157, possibly higher.

SUPPORT “today”: DJIA:; S&P 500:; Nasdaq Comp.:.
RESISTANCE ‘today”:DJIA:; S&P 500:; Nasdaq Comp.:
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.

Pre-presidential election years have a record of being the best of the four-year election cycle with presidential election years running a close second. But the eighth year of a two-term presidency is the exception with the S&P 500 losing an average of 10.9% going back to 1901.*
This supports my expectation of a correction in January setting the precedent of a volatile year for stocks in 2016.
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 November 19, 2015, a reasonable risk is 17,580 a more extreme risk is 17,436. Near-term upside potential is 17,967
 STATUS OF MARKET: Bullish but “at risk” of a correction, especially Fed-based
 OPPORTUNITY: RISK: Risk increases with higher market, but light on the Street is GREEN in spite of negatives.
 CASH RESERVE: 25% – 45% depends on tolerance for risk.
 KEY FACTORS: Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; Stimulus Europe/China a catalyst !!
 CONCLUSION: Suddenly, odds of a December bump up in interest rates has increased dramatically. Over the years, the market has sold off when it appeared that an increase was imminent. It did not do so after the announcement Friday, but did on Monday as the Street began projecting the timing of subsequent rate increases in 2016 – 2017.
Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to mam.econoday.com.
*Stock Trader’s Almanac
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
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

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.