Easy Does It on Today’s Rally

Investor’s first read Daily edge before the open

DJIA: 17,402
S&P 500
: 2,086
Nasdaq  Comp.5,044:
Russell 2000: 1,208

Thursday,  Aug 13, 2015   8:03 a.m.

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TODAY: 

     There simply is no other place to put one’s money.  That will work until  the market keeps dropping when just about everyone expects it to bounce. That’s how it works at tops. 

      “New-to-the market” investors are especially attracted to buy on that initial drop. Having seen the market rise relentlessly, they finally make the plunge, sure that it is safe to buy.

      Yesterday’s rebound  fulfilled my  alert for traders of the “possibility” of a one-day reversal where a big loss in early trading is reversed with stocks recouping all of the day’s loss. 

      We have had a lot of these one-day reversals.  Stocks drop to a level the Street’s computers  think is attractive if only for a couple days and the heavy hitters step in.

      In fact, we have had so many of these reversal in both directions. They are readable in advance, but the moves are short-lived.

      Money can be made, but positions must be  large enough so it takes only a fraction of a point, or point  to make one’s day.  This trading partly explains the volatility.

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      Yesterday’s low hit halfway between my reasonable and extreme risk bottoms for my technical analysis of the 30 industrials (17,250 and 17,056)

RESISTANCE:  DJIA:17,492; S&P 500: 2,096 ;  Nasdaq Comp.:5.068  .    

SUPPORT: DJIA:  17,319 ; S&P 500: 2,076 ; Nasdaq Comp.:5,015

Think of a yo-yo, then think of market volatility at turning points (major and minor).  My supports here are questionable.

     A rally failure before 11:00 a.m. can accelerate on the downside. 

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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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  • STATUS OF MARKET: Bullish but vulnerable to a continued correction/consolidation into the fall
  • OPPORTUNITY: Volatility has set in, market reversed Tuesday after quick plunge and will be rebounding into resistance (again).
  • RISK: Above average with news sensitive market.
  • CASH RESERVE: 25%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION:  Big week for economic reports plus FOMC meeting and a report (no press conference) at 2:00 Wednesday.
  •  

SUMMARY 

     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 ? So far, results are mixed. Yesterday’s news indicates softness in chain store sales and Consumer Confidence, but a bit of strength in PMI Services  and good strength in Richmond Fed Manufacturing.

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

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My TECHNICAL ANALYSIS  of the 30 DJIA Companies:  (As of 8/11).

 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. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages,
     As of  August 11,  a reasonable risk is 17,250; a more extreme risk is 17,056The upside potential is has dropped with the market’s inability to follow through last week and is now 17,758.

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KEY EXTERNAL FACTORS: 

-Devaluation of the Chinese yuan

-U.S. economy – rebound Q3 and Q4 ?

-Fed increase in interest rates

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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