Global Attempts to Stimulate Economies

Investor’s first readDaily edge before the open

DJIA:  17,489
S&P 500: 2,052
Nasdaq  Comp:4,920
Russell 2000: 1,154

Friday:  Oct. 23, 2015   9:01 a.m.

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      Yesterday’s surge stock prices  is attributed to comments by European Central Bank’s Mario Draghi that the bank’s 1 trillion euro bond buying program policy would be examined in December, suggesting its quantitative easing (QE) program would be increased or extended beyond its September 2016 deadline.

      Today’s pre-market strength is partly due to the fact the People’s Bank of China cut its benchmark interest rate  by 25 basis points to 4.35%. It was its sixth cut in a year and is designed to spark a rebound in China’s sluggish economy.

      With respect to Europe, this suggests is that the Fed is unlikely to raise rates in December at a time the ECB is upping QE in an effort to boost member economies.

       Looks like every country  is pursuing efforts to revive struggling economies with either rates that are next to zero or even negative interest rates. Yields below zero  mean investors holding bonds until maturity will receive less than they paid for them, a negative return in exchange for safety. Does this make sense ?

       Q3 earnings are mixed, but concerns are rising about revenues. Corporations have exhausted tricks to engineer  better bottom line growth and are now challenged to sustain or improve top line growth. The DJIA and S&P 500 attacked a formidable area of resistance yesterday, the

DJIA all but reaching the level in August where the average began its four

day, 2,000 point plunge.   The S&P 500 and Nasdaq Comp. still have a way to go

before recouping the August loss.

       The markets will open sharply higher today and may even spike in the first hour

of trading, so market orders to buy may be untimely.

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RESISTANCE today: DJIA: 17,596 S&P 500:2,066; Nasdaq Comp.:4,951

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NOTE:  There is no FOMC meeting scheduled for November, and no press conference scheduled for October. If a press conference is suddenly scheduled for October, it will be a tip off to an announcement of a rate increase, likewise  for a meeting/press conference is scheduled for November.     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 

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  October 14, 2015,  a reasonable risk is 16,793 a more extreme risk is 16,527. Near-term upside potential is 17,355.
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  • STATUS OF MARKET: Bullish but “at risk” of  a correction, especially Fed based
  • OPPORTUNITY: RISK: Above average with news sensitive market.
  • CASH RESERVE: 25% – 45%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION:  Encouraged by the prospect the Fed won’t raise interest rates this year due to softness in the economy, the stock market has rebounded from a support level established after the August 24 “flash crash.” It is now beginning to probe into an area from which it broke down in August where the upside should be more challenging.

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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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