Global Bond Markets Fear Rise in Rates

Investor’s first read Daily edge before the open

DJIA: 17,764
S&P 500: 2,080
Nasdaq  Comp.: 5,013
Russell 2000: 1,249

Wednesday, June 10, 2015   9:07 a.m.

SUMMARY:

     The FOMC meets next week, so the Street will ponder the possibilities of a bump up in interest rates. The action in the bond markets indicates major concern that rates are rising sooner rather than later.  The iShares 20+year T-bond ETF (TLT) has dropped 16% from its February 52-year high and is now back to October 2014 levels.          

     Since February, the S&P 500 has plunged three times  within an established trading range (see below) only to rebound.

     However, the Bulls have been confident the market will press higher as long as the Fed keeps interest rates at these levels.

      If suddenly they decide it’s time to stop buying and sell, we are looking at an 8% to 14% drop, or 1,430 – 2,500 points in the DJIA.  The reason would be, they would all see the downside risk at the same time and hit the exits, which under those conditions would be narrow, getting narrower.

TODAY

      Yesterday’s bounce was unimpressive, but the bulls deserve another shot, since there was no follow through on the downside after a 2.5% drop in the S&P 500 since the beginning of the month.

RESISTANCE today is DJIA: 17,817; S&P 500: 2,087; Nasdaq Comp.: 5,031.

That shouldn’t be a big hurdle for the bulls, failure to break through these levels would be a bad sign.

“MINOR” SUPPORT today is DJIA: 17, 726; S&P 500: 2,073; Nasdaq Comp.: 4,995.

TRADING RANGE

     I have made slight adjustments to that trading range (DJIA: 17,600 to 18,300; S&P 500: 2,040 to 2,130; Nasdaq Comp.: 4,856 to 5,100).


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GREECE (ugh – go away – please)

The consequences of Greece exiting the Eurozone are so dire, a compromise is likely. Not only would it be devastating to Greece’s economy, but its impact on global banking and financial circles would be dramatic. Don’t be surprised if this is a white knuckle one before resolution (this weekend ?)

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ALERTALERTALERT, etc.

     The six months period between Nov. 1 and May 1 has historically been the best six months for the stock market.* The six months between May 1 and Nov. 1 has underperformed. Consistent as this seasonal pattern has been, it must be noted that opportunities to trade against these trends have occurred often.  Analysts and the press will make a lot of noise about this phenom in coming months –  be careful.

     The DJIA and S&P 500 are unchanged since April 30.
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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.
     As of  June 5, a reasonable risk is 17,763; a more extreme risk is 17,556 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,160.  

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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
Q2 earnings for some companies will suffer from U.S. dollar’s strength and plunge in oil prices.
-Market still keyed on the Fed and it’s first bump up in interest rates, which with a slight softening in recent economic reports looks like it may happen later rather than sooner.
Recent strength in employment and housing industry shifting concern from a weakening in the U.S. economy to enough strength to prompt an early bump up in interest rates.

Note: Source of economic data

For a weekly economic calendar and good recap of  indicators, go to mam.econoday.com.

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*Stock Trader’s Almanac

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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