Fed Reverses Fields Yet Again !!

Investor’s first read – Daily edge before the open
DJIA: 17,920
S&P 500: 2,109
Nasdaq Comp.: 4,968
Russell 2000:1,176
Tuesday, June 7, 2016 9:03 a.m.
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Fed Chief Janet Yellen made it clear yesterday – she just doesn’t know what to expect, noting she expects to raise rates only gradually over time, a shift from her May 27 position that a move was probable in coming months.
She quickly reversed fields after Friday’s Employment Situation report which showed a paltry gain of 38,000 new hires versus projections of upwards of 180,000.
The Street opted to ignore the bad news on hires by buying on the news there would not be a rate hike this month, maybe not this year.
Soooo, the Street is still zoned in on “bad news is good news,” and will likely continue thinking that way until bad news is so bad the Street has to be more realistic. Strange stuff !
If the Street were not so Fed-focused, it would have done some selling Friday on the bad jobs report, simply because we may be looking at a recession next year. If that happens, this market is way overpriced. The Street did not adjust for that possibility, but will if a recession becomes more real, ergo – a plunge in prices.
I think we would be better served if one person spoke for the Fed with a policy decision announced at the FOMC meeting. Simply put a muzzle on the Fed Governors and let the announcement come out of the FOMC meeting. That way investors are not jerked first in one direction by a Fed Governor speaking on the East Coast, then by a Governor saying something different on the West Coast.
This is why many call this “most hated bull market ever,” and why I call it just a phony market. It’s all about the Fed with little thought to anything else.
TODAY
That said, the “last rally before a plunge” that started May 19, should persist until the BIG money walks away creating a vacuum.
We will know it when they do – like pulling a plug in a full bathtub.
There is an outside chance that this rally will punch briefly to new 2016 highs (DJIA: 18,167, S&P 500:2,111).
It would only take a 2.14% move by the DJIA and 1.57% move by the S&P 500 to hit new all-time highs. New all-time highs would be accompanied by a lot of press hoopla and a lot of panicky buying. The BIG money does not buy that kind of market. It sells it.

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SUPPORT “today”: DJIA:17,866; S&P 500:2,103; Nasdaq Comp.:4,953.
RESISTANCE “today”: DJIA:18,036; S&P 500:2,122; Nasdaq Comp.:5,001.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Earnings: Q1 earnings were a smidge better than forecast. Initially, it appeared the Street was relieved, but weakness has been creeping in, suggesting something else is calling the shots – Try uncertainty, something the Street never dealt well with. Political: A big part of that uncertainty has to be political.
Oil: Crude oil hit a seven-month high after Goldman Sachs analysts forecast $50 oil later in the year. Meeting in Vienna today could change a lot.
Seasonal: Eighth year of two-term presidential cycle usually bad starting April/May. Worst six months of year is historically May 1 to November 1.* Phenom referred to as “Sell in May and Go Away.” The two patterns combined spell trouble. Note: Significant rallies have occurred between May and November, testing the validity of this bromide. No indicator is bullet proof.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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 May 26, 2016, a reasonable risk is 17,656 a more extreme risk is 17,526. Near-term upside potential is 17,963.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The S&P 500 is in its 8th year of a bull market, selling at 17.8 X earnings, only 2.5% off its all-time highs, after a 212% bull rise.
Corrections started in spring in each of the last six years, the biggest being 19.8% in 2011, and smallest 2.3% in 2,014.
They started: 2010 (Apr. 26), 2011(May 2), 2012 (May 1), 2013 (May 22), 2014 ( May 13), 2 015 (May 15). The 2014 correction was insignificant, the 2015 more of a trading peak that trended sideways-to-down before the August flash crash.
So far, Q1 earnings are mixed-to-slightly better than projected. The key will be guidance and projections for Q3 and Q4.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 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 Q1, and 2016 earnings questionable. Fed has market under its spell.
////////////////////////////////////////////////////////////////////////////////////////////////
Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Stock Trader’s Almanac
…………………………………………………………………….
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

Investor’s first read – Daily edge before the open
DJIA: 17,920
S&P 500: 2,109
Nasdaq Comp.: 4,968
Russell 2000:1,176
Tuesday, June 7, 2016 9:03 a.m.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Fed Chief Janet Yellen made it clear yesterday – she just doesn’t know what to expect, noting she expects to raise rates only gradually over time, a shift from her May 27 position that a move was probable in coming months.
She quickly reversed fields after Friday’s Employment Situation report which showed a paltry gain of 38,000 new hires versus projections of upwards of 180,000.
The Street opted to ignore the bad news on hires by buying on the news there would not be a rate hike this month, maybe not this year.
Soooo, the Street is still zoned in on “bad news is good news,” and will likely continue thinking that way until bad news is so bad the Street has to be more realistic. Strange stuff !
If the Street were not so Fed-focused, it would have done some selling Friday on the bad jobs report, simply because we may be looking at a recession next year. If that happens, this market is way overpriced. The Street did not adjust for that possibility, but will if a recession becomes more real, ergo – a plunge in prices.
I think we would be better served if one person spoke for the Fed with a policy decision announced at the FOMC meeting. Simply put a muzzle on the Fed Governors and let the announcement come out of the FOMC meeting. That way investors are not jerked first in one direction by a Fed Governor speaking on the East Coast, then by a Governor saying something different on the West Coast.
This is why many call this “most hated bull market ever,” and why I call it just a phony market. It’s all about the Fed with little thought to anything else.
TODAY
That said, the “last rally before a plunge” that started May 19, should persist until the BIG money walks away creating a vacuum.
We will know it when they do – like pulling a plug in a full bathtub.
There is an outside chance that this rally will punch briefly to new 2016 highs (DJIA: 18,167, S&P 500:2,111).
It would only take a 2.14% move by the DJIA and 1.57% move by the S&P 500 to hit new all-time highs. New all-time highs would be accompanied by a lot of press hoopla and a lot of panicky buying. The BIG money does not buy that kind of market. It sells it.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
SUPPORT “today”: DJIA:17,866; S&P 500:2,103; Nasdaq Comp.:4,953.
RESISTANCE “today”: DJIA:18,036; S&P 500:2,122; Nasdaq Comp.:5,001.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Earnings: Q1 earnings were a smidge better than forecast. Initially, it appeared the Street was relieved, but weakness has been creeping in, suggesting something else is calling the shots – Try uncertainty, something the Street never dealt well with. Political: A big part of that uncertainty has to be political.
Oil: Crude oil hit a seven-month high after Goldman Sachs analysts forecast $50 oil later in the year. Meeting in Vienna today could change a lot.
Seasonal: Eighth year of two-term presidential cycle usually bad starting April/May. Worst six months of year is historically May 1 to November 1.* Phenom referred to as “Sell in May and Go Away.” The two patterns combined spell trouble. Note: Significant rallies have occurred between May and November, testing the validity of this bromide. No indicator is bullet proof.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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 May 26, 2016, a reasonable risk is 17,656 a more extreme risk is 17,526. Near-term upside potential is 17,963.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The S&P 500 is in its 8th year of a bull market, selling at 17.8 X earnings, only 2.5% off its all-time highs, after a 212% bull rise.
Corrections started in spring in each of the last six years, the biggest being 19.8% in 2011, and smallest 2.3% in 2,014.
They started: 2010 (Apr. 26), 2011(May 2), 2012 (May 1), 2013 (May 22), 2014 ( May 13), 2 015 (May 15). The 2014 correction was insignificant, the 2015 more of a trading peak that trended sideways-to-down before the August flash crash.
So far, Q1 earnings are mixed-to-slightly better than projected. The key will be guidance and projections for Q3 and Q4.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 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 Q1, and 2016 earnings questionable. Fed has market under its spell.
////////////////////////////////////////////////////////////////////////////////////////////////
Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Stock Trader’s Almanac
…………………………………………………………………….
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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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