Correction Possible – Great Trading Opportunity

Investor’s first read Daily edge before the open

DJIA: 18,232
S&P 500: 2,16
Nasdaq  Comp.: 5,089
Russell 2000: 1,252

Tuesday, May 26, 2015   8:52 a.m.

SUMMARY:
    
Once again the Street will be confronted by its two demons – the economy and the Fed.

     Here’s the problem. Since this bull market hit liftoff in early March 2009, the Street is addicted for its security by the continuance of the Fed’s zero-based interest rate policy.  Soft economic numbers have been welcomed, since they assured the Street  that the Fed policy would continue.

     Suddenly, there is now concern that a recession may be in the wings.  That may be too  much “softness” for the Street to handle.

     Now what ?

     Do they buy soft economic numbers, or sell ?

     But what if the economic reports suggest a second half rebound ?

     Does that increase the odds of an early bump in interest rates ?

     Cleveland President of the Fed Res. Bank of Cleveland (alternate voting member) says the time is near if economic data comes in  according to her forecasts.

     At this point, I believe a Fed announcement of a bump in interest rates would only temporarily hammer stock prices, maybe only for a day or two.

     We may get an early read on the economy today as a host of economic reports hit the news, starting with Durable Goods (minus 0.5% Apr.), house prices at 9:00, PMI Services flash at 9:45, New Home Sales, Consumer Confidence, Richmond Fed Manufacturing and State Street Investor Confidence at 10:00, and the Dallas Fed Manufacturing Index at 10:30.     

     Two weeks ago, I  headlined  that the month of May will be a crossroads where the market will move decidedly up or down, breaking out of the  three month trading range, roughly (DJIA 17,600 – 18,200; S&P 500: 2,040 – 2,120; Nasdaq Comp.: 4,850 – 5,100). Bulls have a slight edge.

TODAY:
Support today is: DJIA:18,136; 2,112; Nasdaq Comp.5,056.

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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 22, a reasonable risk is 18,120; a more extreme risk is 17,990 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,511.

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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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