FED Out in Force – Uncertainties Persist

Investor’s first read – Daily edge before the open
DJIA:18,228
S&P 500: 2,159
Nasdaq Comp.:5,305
Russell 2000: 1,246
Wednesday, September 28, 2016 8:48 a.m.
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WORD-OF-THE-DAY LOOKUP ASSIGNMENT: “Confirmation bias.”
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WHAT COULD HURT THE MARKET
-The uncertainty created by a dead heat in the race for the presidency
-Q3 earnings reports in October, which are expected to mark the sixth straight quarterly decline for the S&P 500.
-a downward revision of 2017’s S&P 500 earnings, currently expected to increase 13.4%.
-if the Street suddenly realizes Fed doesn’t have an exit strategy, never did.
-a recession in Europe. Numbers starting to stink. Markit flash Eurozone PMI at 20-mo. Low Sept; Germany PMI service sector slowest 16 mo..
Reportedly, three-quarters of UK CEOs surveyed by KPMG are considering relocating HQs due to Brexit. The British pound has been getting pounded.
-another government shutdown based on funding flood relief for Louisiana addressing the Zika crisis and Flint Michigan’s drinking water debacle
This should be resolved with a compromise.

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THE FED THIS WEEK
The Fed will be out in force this week. No fewer than ten Fed officials will speak at different times from different parts of the world.
Neel Kashkari and Robert Kaplan spoke yesterday. Wednesday brings Kashkari again, James Bullard (10:45 a.m.), Charles Evans (1:30 p.m.), Loretta Mester (4:35 p.m.), Esther George (7:15 p.m.); Thursday: Patrick Harker (5:00 a.m.), Dennis Lockhart (8:50 a.m.), Jerome Powell (10:00 a.m.), Janet Yellen (5:10 p.m.).
I am unsure what the full court press is all about, except it is a big week for reports on the economy, and of course, the aftermath of the debate. They may be laying the groundwork for a November rate increase.
TODAY
The blue chip DJIA and S&P 500 market averages have been trading between a narrow range (range bound) since early July. Uncertainty over who will become president in November has put the trading range in jeopardy.
Who wins does make a difference, since the positions of the candidates differs widely.
The FED is out in force this week, possibly testing the Street’s tolerance for a November 2 rate bump.
Today has all the ingredients of being a ho-hummer, which is a good reason to stay focused.
The market should continue yesterday’s rally with a healthy gain. Failure to hold its gain today would be a bad sign.
We have the Fed out there with its cruise control mission, and we have a host of economic indicators tomorrow and Friday to chew on.
Bottom line: DJIA must hold above 17,990, the S&P 500 above 2,119.
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Today’s economic reports: S&P Case Shiller Home Prices (9:00), PMI Services (9:45), Consumer Confidence (10:00), Richmond Fed Mfg. (10:00), State Street Investor Confidence (10:00). Check mam.econoday.com for more.
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SUPPORT “today”: DJIA:18,161;S&P 500:2,151; Nasdaq Comp.:5,286
RESISTANCE “today”: DJIA:18,316; S&P 500:2,168; NASDAQ COMP.:5,323
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NEW PROJECTION:
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 September 16, 2016, a reasonable risk is 18,011 a more extreme risk is 17,908 Near-term upside potential is 18,435.
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ELECTION YEAR PATTERN BEARISH AFTER MARCH
(So far this is not holding up)
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.
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 STATUS OF MARKET: Neutral – but very, very vulnerable. Expect volatility
 OPPORTUNITY: RISK: Risk high, Profit taking justified.
 CASH RESERVE: 45%. Consider 75% now if tolerance for risk is low.
 KEY FACTORS: Outlook for Q3, and 2016 earnings questionable with strong U.S. dollar. Forecasts for 2017 still for a gain in S&P 500 earnings of 13.4%. It has been there for months in spite of deteriorating earnings this year. Any downward revision could impact the market significantly.
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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Bloomberg.com (Excellent pre-market read)
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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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