Fed Decision Thurs. – Quad Witching Fri. !!!

Investor’s first read Daily edge before the open

DJIA:  16,599
S&P 500:  1,978
Nasdaq  Comp.;4,860
Russell 2000:   1,165

Wednesday:  Sept.c 16,  2015   9:08 a.m.

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SUMMARY:

   Yesterday’s jump in stock prices was partly due to unwinding of option/ futures positions as well as buyers front running what they think will be a decision tomorrow at 2:00 by the Fed NOT to raise interest rates.

     Today may be more of the same, however it’s just difficult for traders of options and futures to make a decision in advance to the expiration  of contracts Friday when the Fed is only announcing its policy decision the day before.

      What’s worse, Friday is Quadruple Witching occurs four times a year and is the day index futures, index options, stock options and stock futures expire. The expiration of all four only occurs four times a year (Sept.,Dec., Mar., June).

      Quad Witching is normally accompanied by heavy trading activity; the potential exists for extra heavy volume and possibly extreme volatility.

TODAY: 

      With a big jump yesterday, the price charts of the market averages suddenly changed from sagging to upbeat.  Under normal conditions, that would be a green light to buy.  But this is FOMC week along with Quad Witching week, all bets are off.

SUPPORT today: DJIA: 16,765; S&P 500:1,997; Nasdaq Comp.:4,903.

RESISTANCE today: DJIA: 16,466; S&P 500:1,964; Nasdaq Comp.:4,826 .

Obviously, any comment by a Fed official, voting or non-voting, that even hints at a decision would move the market in a big way.  It is a coiled spring with big potential up or down depending on a decision by the Fed.

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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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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” (0.1498588) 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  September 8, 2015,  a reasonable risk is 15,827; a more extreme risk is 15,713. Near-term upside potential is 16,930.  Note: A drop below DJIA 15,713  would be very bearish.
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NEWS ENVIRONMENT    

        The following news has been  a contributor to recent market weakness, though most of these issues have been with us for weeks/months. 

-Chinese stock markets worst drop since 2007,  currently rebounding

-European stocks on verge of bear market (Germany’s DAX off 20%)

-U.S. stocks recovering from ugly crunch

-Commodities at 16-year low, but oil stabilizing.

-currency meltdown

-No one has a clue when the Fed will bump interest rates, including the Fed. The latest comment was by N.Y. Fed’s Dudley who said an increase in Sept. is “Less compelling”.

-Brent oil and WTI oil falling again

      NOTE: Some of the Street’s pundits are arguing that this market behavior is unreasonable since the U.S. economy is doing well, if not great. Bear in mind, the stock market has historically been an early warning signal for the beginning of a recession, leading by as little as two months and as much as  13 months.

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  • STATUS OF MARKET: Bullish but in a correction  into the fall.
  • OPPORTUNITY: Volatility has set in, market has rebounded from August’s “flash crash”  and is approaching an area of resistance.
  • 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:  Having broken major support levels, the market is probing for a level that discounts uncertainties and negatives.
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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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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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