Correction to Test Bull’s Appetite for Stocks

Investor’s first readDaily edge before the open

DJIA:  17,081
S&P 500: 2,003
Nasdaq  Comp: 4,796
Russell 2000: 1,147

Wednesday:  Oct. 14, 2015   9:09 a.m.

/////////////////////////////////////////////////////////////////////////////////////////////////////////
SUMMARY:

    The question begging an answer here is, what is the pressing reason to buy stocks now ?

    Okay, if Q3 earnings are better than expected and future estimates and guidance upbeat, that would be one reason.

     If the Fed assures the Street interest rates won’t be bumped until Q1 or Q2 of 2016, that would (but shouldn’t) please Wall Street. If economies abroad stabilize, even pick up, stocks here would get a shot in the arm. Then too, the six months going forward is historically the best six months* of the year.

     Unfortunately, the Street  continues to have a single focus – the Fed, opting to be bullish if an interest rate rise is not imminent, bearish if one is.

      The danger in this boneheaded thinking is other factors are ignored, such as economies here and abroad and corporate earnings, current and projected.  A dysfunctional government and international tensions with a real chance of escalation don’t enter into the Street’s algorithms.

       But these factors can suddenly have an impact and do so at a time the stock market is overvalued due to being pushed higher by the Street reacting to news the Fed won’t be raising rates any time soon.

       Who really knows what the Fed will do. Clearly the Fed doesn’t. Fed Governors Tarullo and Brainard don’t favor a raise before year-end, Fed Chief Yellen and Governor Bullard do.

TODAY:

     The rally over the last eight days has begun to run into resistance from nervous investors who saw stocks plunge from current and higher levels and are prompted to sell, as well as from investors who bought in at lower prices and are taking profits.

     That’s normal so long as the DJIA doesn’t drop below 16,475 (S&P 500:1,951).

      While there is room for more upside before the market gets deep into overhead supply, the risks increase as prices rise.

       I am more concerned about a correction from current levels being extended by unexpected bad news when it is ready to turn back up from lower levels.

.……………………………………………………………………….

SUPPORT today:  DJIA:16,946; S&P 500:1,987; Nasdaq Comp.:4,758

RESISTANCE today: DJIA: 17,138; S&P 500:2,009;  Nasdaq Comp.:4,813

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 

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.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

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 9, 2015,  a reasonable risk is 16,990 a more extreme risk is 16,876. Near-term upside potential is 17,377. 
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

………………………………………………………………………………

  • STATUS OF MARKET: Bullish but “at risk” of  a bear market.
  • OPPORTUNITY: RISK: Above average with news sensitive market.
  • CASH RESERVE: 35%
  • 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.

//////////////////////////////////////////////////////////////////////////////////////////////////////////

Note: Source of economic data

For a weekly economic calendar and good recap of  indicators, go to mam.econoday.com.

*Stock Trader’s Almanac ( New edition should be out – get it !)

…………………………………………………………

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 *