Correction to Set Up Major Buying Opportunity

Investor’s first readDaily edge before the open

DJIA: 17,730
S&P 500: 2,076
Nasdaq  Comp.: 5,009
Russell 2000: 1,258

Monday, Jul 6, 2015   9:06 a.m.

SUMMARY  

     The fallout from Greece’s Sunday referendum “NO” vote will continue for weeks.  How that plays out in international markets is anyone’s guess right now, but markets will adjust.

     Clearly, I have to assume a worst case scenario has been  given consideration by Greece’s lenders (ECB, EU institutions, IMF) after five years of ups and downs.

     Without lender concessions in the interim, Greece’s banks and economy cannot avoid  a collapse. It needs help (Russia ??)

     Expect confusion, unfounded statements by pundits and government officials, positive developments one day, negative the next.

KEY TO U.S.  STOCK MARKET:

     More importantly, the Street is trying to assess the strength of the rebound in the U.S. economy from its Q1 slump. Housing is a bright spot, but auto sales, manufacturing and job growth are not rebounding sharp enough  at this point, raising the possibility of a slump in coming quarters.

     The disruption of financial markets in Europe caused by Greece’s “NO” vote Sunday won’t help.

     Without a sudden resurgence in the economy, the stock market will have to find a new comfort level.

TODAY:

      News out of Greece will break U.S. stock prices down from the trading  range that  confined it for five months.

      In a news sensitive market like this, rallies and rally failures will occur in response to  news out of Greece

     The question is, how much of this breakdown is Greece related and how much is concern by the Street for the economy ?

     I don’t think recession is a concern so much as a failure of the economy  to  rebound sharply from Q1’s slump in which case stocks would be overpriced.

     Not so, if the U.S. economy gains traction.  It’s just too early to tell.

     Risk this week is DJIA 17,326; S&P 500: 2,028; Nasdaq Comp.:4,893. This assumes uncertainty will continue without the semblance of a new agreement between Greece and its lenders that heads off disaster.

     Under these circumstances rally failures are a major risk, rebounds in response to news that  is reversed in a day or two.

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THE FED

      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:   LOWER

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 2,  a reasonable risk is 17,527; a more extreme risk is 17,380 The upside potential is has dropped with the market’s inability to follow through last week and is now 17,948.

   

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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

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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