Fed-speak to Turn Hawkish ?

Investor’s first readDaily edge before the open

DJIA:  17,918
S&P 500: 2,109
Nasdaq  Comp:5,145
Russell 2000: 1191

Wednesday:  Nov. 4, 2015   9:03 a.m.

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      Gary Shilling, widely respected economist and publisher of INSIGHT, does not expect a rate increase in December, in fact he sees its “zero-rate policy in place well into next year and even beyond in the face of tepid economic growth and inflation rates well below the central bank’s  2% target.”

      We may find out today if the Fed agrees with Shilling, who has been spot-on with economic issues going back for years, having called the great recession  and its fallout well ahead of the crunch.

      Fed Chief Janet Yellen speaks at 10:00 a.m., today followed on Thursday by  the Fed’s  William Dudley and Stanley Fischer at 8:30 a.m. and 9:10 a.m. respectively.

      Yellen, Dudley and Fischer are heavy hitters and there is no FOMC meeting scheduled for this month, so they may feel a need to bridge the gap.

      Right now, the Street is not expecting a rate increase this year, as evidenced by the surge in stock prices in recent weeks.

      Do not be surprised if the Fed trio is now more hawkish on a rate increase in December when they speak today and tomorrow.  

      Granted the FOMC voted 9-1 last month to hold rates at present levels, but

 the U.S. and global economies are looking a bit more upbeat than a month ago.

      China is determined to recoup a slumping growth rate, and suddenly the major economies in Europe are perking up per the latest Eurozone PMI report released today.   

      While some economic reports have really been positive, certain factors portray them as  negative.  While the annual growth rate of Q3 GDP came in at 1.5% vs, 3.9% in Q2, it would have been higher if it weren’t for a big reduction in inventories. That bodes well for future quarters if businesses rebuild to accommodate increasing demand. 

       September’s retail sales (0.1%) would have been higher if it weren’t for a 3.2% drop in service station  revenues as a result of plunging gas prices.  Apparently, the consumer  savings on gas haven’t found their way back into the economy (yet).

       Motor vehicles sales continue to track a banner year, though  Factory Orders continue to suffer from a slump in exports, down 1.0% for the 11th decline in 14 months.

       At 8:30 today the ADP Employment Report for October came in at 182,000 jobs added, a good showing, but the big report comes at 8:30 a.m. Friday with the Employment Situation report.

      

     

     

     

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SUPPORT “today”: DJIA:17,786; S&P 500: 2,093; Nasdaq Comp.:5,101

RESISTANCE “today”: DJIA:18,087; S&P 500:2,129; Nasdaq Comp.:5,193

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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” (0.149677) 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  November 2, 2015,  a reasonable risk is 17,450 a more extreme risk is 17,364. Near-term upside potential is 17,878.
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  • STATUS OF MARKET: Bullish but “at risk” of  a correction, especially Fed-based
  • OPPORTUNITY: RISK: Risk increases with higher market, but light on the Street is GREEN in spite of negatives.
  • CASH RESERVE: 25% – 45% depends on tolerance for risk.
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; Stimulus Europe/China a catalyst !!
  • CONCLUSION:  Encouraged by the prospect the Fed won’t raise interest rates this year due to softness in the economy, the stock market has exploded from a consolidation area established after the August 24 “flash crash” and has penetrated deep into a resistance area developed when the market broke down  in August.

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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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