ECB Action May Not Help – What Then ?

Investor’s first read – Daily edge before the open
DJIA:17,000
S&P 500:1,989
Nasdaq Comp.:4,674
Russell 2000: 1,072
Thursday: March 10, 2016 8:48 a.m.
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The stock-index futures got a big boost before the open by the European Central Bank’s (ECB’s) decision to lower its benchmark interest rate to zero, cut its deposit rate to minus 0.4%, and increase its asset purchases to 80 billion euros from 60 billion euros, all designed to counter deflation and stimulate a lagging economy in the euro area.
That’s enough to hand the bulls a slight edge in the tug of war, but will the ECBs action accomplish anything ?
Right now, the markets are riding a crest of relief that, “we didn’t crash after all,” referring to the scary way January kicked off.
All this increases the possibility that any correction of significance will not occur until late April when a seasonal pattern kicks in that has historically favored the bears. While Nov.1 to May 1 has historically been the best six months of the year, May 1 to November 1 has underperformed.*
In such a news sensitive market and a divisive presidential election year, anything can happen between now and late April, but it is important to look ahead just in case the market is sizzling in late April and the thought of a correction is the last thing anyone is expecting.
TODAY:
Today’s surge punches further into an area of resistance, the levels from which the market plunged in January.
Buying the ECB news alone is risky, especially buying at the open when prices are marked up sharply. Traders who bought at lower prices should lighten up a bit more.
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RESISTANCE : “today”: DJIA:17,134; S&P 500:2,008; Nasdaq Comp.:4,716
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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 2, 2016, a reasonable risk is 16,716 a more extreme risk is 16,651. Near-term upside potential is 17,134
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 STATUS OF MARKET: Bearish – but trying to turn. Expect volatility
 OPPORTUNITY: RISK: Risk high, but opportunity for traders at lower levels.
 CASH RESERVE: 25% – 45%. Consider 75% now
 KEY FACTORS: Fear taking hold. Concern for the number and extent of additional bumps in interest rates by the Fed; strength of economic rebound; Outlook for Q1, and 2016 earnings as a whole.
The Street is counting on a big jump in Q3 and Q4.
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Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to mam.econoday.com.
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*Stock trader’s Almanac
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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