Huge Test for Bulls – Huge !

Investor’s first readDaily edge before the open

DJIA:  16,272
S&P 500: 1,923
Nasdaq  Comp.:4,627:
Russell 2000: 1,097

Friday:  Oct. 2, 2015   9:15 a.m.

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      Bearish sentiment was jolted Tuesday, Wednesday, and Thursday as stocks stabilized and rebounded.

      But the bears were quick to jump all over an upside breakout at the open yesterday driving down stocks sharply until noon when buyers finally stepped in to end  the rout and work stocks back up to even at the close.

     One hour before the open today, it looked like the market would be opening up, with futures trading nicely on the upside.

      That’s when the Employment Situation report hit with only 143,000 new jobs posted in September well below the Street’s comfort level.

      Instantly, the market tanked.    While motor vehicle sales in Sept. were solid, construction spending on single-family and multi-family homes  improving, both the PMI Manufacturing and the ISM Manufacturing indexes signal trouble. And now a weak employment report to confirm some cracks in the foundation. All this with economies abroad  struggling.

TODAY:     

This looks like a goal line stand for the bulls. A breakdown from here signals another leg down and it will be ugly.

      No fewer than six top level Fed execs speak today starting at 8:30 and ending at 2:00 p.m.

      What did they know in advance ?

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SUPPORT today:  DJIA: 16,027; S&P 500: 1,891; Nasdaq Comp.:4,551

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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.     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>    

WHAT THE FED SHOULDS DO:

       No fewer than six (6) Federal Reserve heavies speak starting at 8:30 and ending at 1:00p.m..  WOW !  Six in one day, – That, and Hurricane Joaquin all for one weekend !

        What the Fed should do is what all of us investors, analysts, etc who have been in this for a while have learned to do  and that is to come out and admit they erred by inaction in the past and now with  implying a rate increase was likely by year-end. “We were wrong” –  Say it !  The numbers don’t justify it now.  Then  add, “When the numbers and international risks justify it we will raise rates, not before.”

      The Street is as much to blame as the Fed. It’s all about the Fed – Will it ? Won’t it ?  The Street  should get back to basics – the bigger picture – earnings one year out, not this asinine quarter-to quarter stuff; the big economic picture here and abroad, U.S. Governance, Corporate responsibility.

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  September 28, 2015,  a reasonable risk is 15,586 a more extreme risk is 15,079. Near-term upside potential is 16,575.  Note: A drop below DJIA 15,713  would be very bearish.
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NEWS ENVIRONMENT    

        The following news has been  a contributor to recent market weakness, though most of these issues have been with us for weeks/months. 

-Chinese stock markets worst drop since 2007,  currently rebounding

-European stocks on verge of bear market (Germany’s DAX off 20%)

-U.S. stocks recovering from ugly crunch

-Commodities at 16-year low, but oil stabilizing.

-currency meltdown

      NOTE: Some of the Street’s pundits are arguing that this market behavior is unreasonable since the U.S. economy is doing well, if not great. Bear in mind, the stock market has historically been an early warning signal for the beginning of a recession, leading by as little as two months and as much as  13 months.

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  • STATUS OF MARKET: Bullish but “at risk” of  a bear market.
  • OPPORTUNITY: Volatility has set in, market has rebounded from August’s “flash crash”  but will likely drop to a lower level.
  • RISK: Above average with news sensitive market.
  • CASH RESERVE: 25%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION:  Having broken major support levels, the market is probing for a level that discounts uncertainties and negatives.
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Note: Source of economic data

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

*Stock Trader’s Almanac ( New edition should be out)

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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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