Change of Heart ? Street Now OK with Rate Bump ?

Investor’s first readDaily edge before the open

DJIA:  17,910
S&P 500: 2,099
Nasdaq  Comp:5,147
Russell 2000: 1,199

Monday:  Nov. 9, 2015   8:58 a.m.

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      Suddenly a trade off emerges for the Street – which is more bullish, a pick up in the economy, or no action on interest rates by the Fed ?

      Shortly after the Fed implemented its zero-based federal funds policy in 2008, maintaining rates at that level  become the Street’s lifeline.

      Over the years, speculation that the Fed would turn to higher rates turned stocks down, assurance by the Fed it wouldn’t, turned them back up.

      A huge jump in Friday’s 8:30 Employment Situation  report vastly increased the odds the Fed will announce it has raised  its fed funds rate at its FOMC meeting December 16.

      Prior to the jobs report, odds were against Fed action in December. An unexpected jump in new hires should have crushed stocks at the open Friday.

      It didn’t !  The inability of the market to tank at the open Friday, encouraged buyers to step in, heading off an ugly plunge.

      If the Street has finally opted for a pick up in the economy vs. a continuation of low rates, stocks will edge up, especially if reports on the economy continue to improve.

      If there is a delayed reaction here, that a bump in rates is bearish, the market must sell off to a level that discounts the problems the Street believes will result from Fed action.

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SUPPORT “today”: DJIA:17,778; S&P 500:2,084; Nasdaq Comp.:5,111

RESISTANCE “today”: DJIA:17,973; S&P 500:2,106 ; Nasdaq Comp.:5,165  >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.     

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  November 7, 2015,  a reasonable risk is 17,731 a more extreme risk is 17,590. Near-term upside potential is 18,237.
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  • 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.  A couple days may change that as the Street begins projecting the timing of subsequent rate increases in 2016 – 2017.
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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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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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