Key Day

Investor’s first readDaily edge before the open

DJIA:  17,737
S&P 500: 2,083
Nasdaq  Comp:5,075
Russell 2000: 1,171

Thursday:  Nov. 19, 2015   9:13 a.m.

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     Once again the Fed came to the rescue of a sliding market, with bad news/good news scenario – “this won’t hurt – just a pinch.”

      The Fed is still on target for a December 16, announcement of the first increase in federal funds since its zero-based rate policy seven years ago.

      As expected here, the release of FOMC meeting minutes at 2:00 yesterday was preceded with reassuring words from Fed’s Loretta Mester and William Dudley designed to sugarcoat action in December.

      Beyond December will depend on unfolding economic events.  For the timing of subsequent rate increases the FOMC employs what it calls a “dot-plot” method drawn on  quarterly interest rate projections from selected officials, which currently is running at a one percentage point annual increase reaching 3.4 percent by 2018.

      Wording in the FOMC minutes reflected the usual hedging like “if things continue to be the way they seem now or improve.”

       So, why did the market surge after the Fed held its ground on the strong possibility of a December rate increase ?

       Relief ?  Surrender ?  Assurance economy here and abroad are stable ?

       I don’t know. I think we must let the market tell us how the Street  sees it.

       Yes, it would be nice to have the first rate increase behind us and get a feel for how the Street values it.  But there will be more to follow any one of which could adversely impact the economy.

       The bottom line here is UNCERTAINTY.

TODAY

      Yesterday’s surge triggered some positive technical signals, opening the door for another jump in prices.

       Pre-market trading does not suggest a big open, raising the possibility, yesterday’s strength was a head fake, that second thoughts on the Street may be to raise cash in face of a December rate increase.

       We should know who wins this one – bulls or bears by 10:30 today.

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SUPPORT “today”: DJIA:17,668; S&P 500: 2,075; Nasdaq Comp.:5,055

RESISTANCE “today”: DJIA:17,856; S&P 500:2,096;Nasdaq Comp.:5,109

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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 13, 2015,  a reasonable risk is 17,117 a more extreme risk is 16,856. Near-term upside potential is 17,630
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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: Suddenly, odds of a December bump up in interest rates has increased dramatically. Over the years, the market has sold off when it appeared that an increase was imminent.  It did not do so after the announcement Friday, but did on Monday as the Street began projecting the timing of subsequent rate increases in 2016 – 2017.
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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

…………………………………………………………

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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