Easy Does It – “Gap” Open in Most Stocks

Investor’s first readDaily edge before the open

DJIA: 17,515
S&P 500: 2,046
Nasdaq  Comp.: 4,909
Russell 2000: 1,228

Thursday, July 9, 2015   8:45 a.m.

SUMMARY 

     China’s mini-bear and Greece’s woes have  crunched U.S stocks over the last two weeks,  resulting in a 5% drop in the S&P 500 Composite.

    However, a  powerful reversal  in China’s stock markets today, as a result of government efforts to stop the selling  there has triggered  huge buying in U.S. stocks before the open, suggesting a  pop of 175 points, or so in the DJIA in early trading.

     This is the “news whipsaw” in action. A turn for the worse in Greece and/or a resumption of selling in China stands to turn U.S. stocks down again.

CHINA

      Ten days of government intervention has finally reversed  China’s stock market rout. Regulators prohibited major stockholders from dumping large positions in more than half the listed listings.  Brilliant !  Wow !  Why didn’t our regulators think of that ?

GREECE  

     Greece’s Prime Minister, Alexis Tsipras, has until Sunday to submit a new proposal when 28 European Union members (19 euro zone members) will meet in Brussels to decide Greece’s fate.

      Until then, a news whipsaw out of Greece (positives – negatives – positives – negatives), will have an impact on  Stocks here, though to a lesser extent.

     A lot is at stake, odds favor a settlement of sorts and the end to the crisis. Obviously, failure to agree would extend the crisis as Greece’s banking system and economy crash and survival of the euro becomes questionable.

TODAY

     A reversal of the June 23 to July 7 plunge would require sustained buying for more than one day and a move above DJIA 17,825; S&P 500: 2,085, and Nasdaq Comp.: 5,038.

     Many U.S. stocks will “gap” at the open which means buyers without price  “limits” on their orders will pay-up for positions.  They could catch the high for the day, which is fine if the market continues to move up.

     Resistance today starts at DJIA: 17,697; S&P 500: 2,071; Nasdaq Comp.:  4,963.

     A rally failure would pave the way for another leg down.

     The biggest factor here is the U.S. economy.  Will it rebound from its reported Q1 slump, which most likely  was distorted by weather, oil prices, the impact of a strong US dollar, even seasonality.

     Recession does not look like an issue, so much as a “pause” in the economy.

     Stock prices will probe for a comfort level, and that could it a couple months of volatility until one is found.

         

    

 

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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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