Manufacturing Jump ? Fed Bump ?

Investor’s first read – Daily edge before the open
DJIA:17,685
S&P 500:2,059
Nasdaq Comp.:4,869
Russell 2000: 1,114
Friday: April 1, 2016 8:58 a.m.
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ECONOMY: Heads up – Manufacturing rebound ?
The ADP Employment report showed a gain of 200,000 jobs. The Employment Situation comes report Friday 8:30 a.m.. However four manufacturing reports hit this week. This group is trying to rise out of a slump, so any uptick will be a positive.
The Dallas Fed Manufacturing report Monday 10:30 came in a bit better than expected; the Chicago PMI hit yesterday with March up sharply. The PMI and ISM Manufacturing reports come at 9:45 and 10:00 respectively today.
EARNINGS (Nothing new – re-read anyhow – important)
In two weeks Q1 earnings will begin to flow and are projected to be down, as are Q2 earnings. It doesn’t get more fundamental than earnings, yet other issues have dominated the attention of the Street so far this year.
April could be the “decider” on whether 2016 is a bear market year, or just a volatile one with big swings up and down as we near the November election.
S&P Capital IQ is projecting S&P 500’s earnings in Q1 to drop 7.0% and Q2 to drop 2.1%.* Earnings are projected to rise only 1.5%, down from a projection of plus 7.4% as recently as January.
ELECTION YEAR PATTERN BEARISH AFTER MARCH
(I will repeat this regularly to keep readers aware of the potential for an April correction)
The market is tracking a pattern for presidential election years where an administration is in its second term.* The news is bad.
Historically, these markets have declined in Jan./Feb., rallied in March then topped out in early April, plunged in May with brief rallies in June and August and a plunge into October prior to the election.
This supports my December forecast of an ugly January, a rough year as a whole, but with several buying opportunities.
TODAY

I am still expecting volatility as the market heads into the Q1 earnings season. Q1 is expected to be ugly. Anything better than that bumps stocks up, however as noted above, April is shaping up as a month a sharp correction begins in keeping with the pattern for the eighth year of a presidency (see above).
We may get a feel next month for what the Street expects for earnings this year, as companies and analysts release guidance and projections for Q’s 2, 3, and 4. At these levels, the market cannot handle another flat year in earnings growth, especially with the possibility of a recession next year, or in 2018.
Yellen’s rally ran into resistance late Wednesday after a sharp rally triggered by comments about the next bump in interest rates not being imminent.
The Fed has clout but little credibility, having flip-flopped on policy three times in three months.
This is a dangerous time for new commitments. The bulls need a brighter earnings picture and assurance a recession is not just around the corner. A pick up in manufacturing would help, and that just may be happening (see above).
However, the downside of that would be the Fed may decide to bump interest rates sooner than expected.
If the Fed would just sit down and be quiet and let the market find a comfort level, investors would be better served.
Historically, early April is strong, it’s what comes after that concerns me.
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SUPPORT “today”: DJIA: 17,576; S&P 500: 2,047; Nasdaq Comp.:4,839.
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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 new DJIA “divisor” (0.14602) 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 March 11, 2016, a reasonable risk is 17,073 a more extreme risk is 16,970. Near-term upside potential is 17,586
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 STATUS OF MARKET: Neutral – but vulnerable. Expect volatility
 OPPORTUNITY: RISK: Risk high, Profit taking justified.
 CASH RESERVE: 25% – 45%. Consider 75% now
 KEY FACTORS: Outlook for Q1, and 2016 earnings questionable.
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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Briefing.com
**Stock Trader’s Almanac
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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
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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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