Easy Does It !

Investor’s first read – Daily edge before the open
DJIA:17908
S&P 500:2,082
Nasdaq Comp.:4,947
Russell 2000: 1,129
Thursday: April 14, 2016 8:07 a.m.
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Q1 EARNINGS
So far, it looks like the Street is looking beyond Q1 earnings to Q4 when growth will appear to accelerate, mostly owing to a favorable comparison the weak showing in Q4 2015.
Companies will be issuing guidance for Q3 and Q4 from which analysts will issue projections. If revisions are lower across the board, the market will take a hit – higher, another leg up.
FactSet Research’s April 1 forecast revised Q1 earnings down to minus 8.5% (-3.7% ex energy) from a plus 0.8% projected in December. Of 121 company’s Q1 guidance, 94 have issued lower estimates. Currently, estimates for 2016 as a whole vary by source, but the trend appears to be downward revision.
TODAY
The market wants to go up. Money managers are pressed for performance, unfortunately at a time they shouldn’t be pressed.
It looks like investors are seeking yield, since they aren’t getting a return on CDs, money markets and bonds.
Just that alone, can press the market up to challenge all-time highs.
Pressure is mounting on investors to jump in, as so often happens when a market presses higher and higher.
As the market rises, so does risk. This is not an “all-in” market.
What can go wrong here ?
Well, the April 17 talks in Doha, Qatar confirming a freeze in oil production unofficially agreed to by Saudi Arabia, Russia, Qatar, and Venezuela could be inconclusive, even blow up.
Brent crude, the benchmark for global (sweet, light) crude is up 30% since the four agreed to agree Feb. 16. Iran’s participation could be a sticking point. Fifteen countries including members and non-members will meet in Doha Sunday.
It looks like the Street is not intimidated by an expected ugly Q1, but it is too early to tell. There are some cracks in the foundation, one being a 2.1% drop in March auto sales. Quarter reports for CSX and JPMorganChase (JPM) were anything but exciting, though both stocks rose.
THIS IS A PHONY MARKET. I DO NOT GET THE IMPRESSION THE STREET IS SURE OF ANYTHING EXCEPT IT LOVES WHEN THE FED FILI-FLOPS IN THE DIRECTION OF SLOWMO ON INTEREST RATE INCREASES.
If the Fed is unable to justify another increase in rates, what does that say about the economy ?
If the Fed increases rates with the prospect of more rate increases to follow, the Street’s “blankie” will be yanked away and we will have another one of those freefalls, this time one that will take longer to recover.
Selective rules, just sit close to the exit. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
SUPPORT “today”: DJIA:17,819; S&P 500:2,072; Nasdaq Comp.:4,931.
RESISTANCE “today”: DJIA:18,006; S&P 500:2,093; Nasdaq Comp.:4,974.
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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 new DJIA “divisor” (0.14602) 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 March 31, 2016, a reasonable risk is 17,664 a more extreme risk is 16,560. Near-term upside potential is 18,102
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ELECTION YEAR PATTERN BEARISH AFTER MARCH
(I will repeat this regularly to keep readers aware of the potential for an April correction)
The market is tracking a pattern for presidential election years where an administration is in its second term.* The news is bad.
Historically, these markets have declined in Jan./Feb., rallied in March then topped out in early April, plunged in May with brief rallies in June and August and a plunge into October prior to the election.
This supports my December forecast of an ugly January, a rough year as a whole, but with several buying opportunities.
FED HYPE CREATES POTENTIAL FOR FREE-FALL
The stock market is constantly adjusting for fundamental, economic, monetary, fiscal, political, psychological and global outlook, moving higher or lower depending on how it is perceived, a process I refer to as seeking a comfort level.
This sifting process is what creates rallies and corrections, bull and bear markets. In seeking a comfort level, the market often hits extremes if only momentarily.
By propping stock prices with verbal hype and changing policy projections, the Fed has denied the market the normal processing of all the other factors that comprise value.
Buyers jump in on Fed hype, and sellers defer action, hanging in as long as the Fed is in there with positive feed.
When an event triggers a sudden break, all that deferred selling hits a market that does not have enough buyers to absorb it, and you get a freefall. Throw in some highly leveraged positions on the wrong side of the market, and you get an horrendous freefall.
With a meltdown looming in 2008/2009 and the S&P 500 down 50% , the Fed had to step in. But, there is no good reason for the Fed to be propping the market now after the S&P 500 has tripled from its bear market lows.
What it is doing is creating a highly vulnerable market, one that can devastate investors if the Fed hype suddenly fails to work.
Freefalls come out of nowhere. Before an investor can respond, markets can be down 3% – 5% en route to a 12% – 20% – 35% plunge.
Like a rogue wave, the next one will strike without warning.

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 STATUS OF MARKET: Neutral – but vulnerable. Expect volatility
 OPPORTUNITY: RISK: Risk high, Profit taking justified.
 CASH RESERVE: 25% – 45%. Consider 75% now
 KEY FACTORS: Outlook for Q1, and 2016 earnings questionable.
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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Briefing.com
**Stock Trader’s Almanac
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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
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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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