Market Needs This Rally to Hold

Investor’s first read Daily edge before the open

DJIA: 17,548
S&P 500: 2,051
Nasdaq  Comp.: 4,922:
Russell 2000: 1,236

Friday, July 10, 2015   8:24 a.m.

SUMMARY 

     China’s stock markets continue to recover and Greece has submitted a new proposal to its creditors to avert a meltdown.

     Pre-market trading indicates  U.S. markets like the news and are rebounding. 

      This is classic news whipsaw, hopefully China and Greece’s influence will wane from now, so the Street can focus on the U.S. economy and corporate earnings which will begin to flow this month.

      BUT, this is still a news whipsaw market. If China’s stock markets resume their plunge and/or Greece’s proposal is rejected, the markets here would resume their decline.

     The biggest factor here is the U.S. economy.  Will it rebound from its reported Q1 slump, which most likely  was distorted by weather, oil prices, the impact of a strong US dollar, even seasonality ?

     Recession does not look like an issue, so much as a “pause” in the economy.

TODAY

      Q2 earnings will begin to flow in coming weeks.  FactSet Research sees year-over-year  for Q2  coming in as a decline of 4.5% with a return to growth developing in Q4 of close to +4.2%.

       Most likely, all this was the reason for the five-month flat trading range that was interrupted by dual negatives (China and Greece).

       BEWARE of crunches in stock prices of companies that “miss” projections, or simply don’t “beat” by enough.  This is an area where I think certain stock prices are manipulated by shorts or institutions that want to accumulate larger positions.

       Wednesday and Thursday we saw rally failures in the form of one-day reversals where essentially all of the day’s advance was lost by the closing bell.

        Today’s rally seems to have more momentum and without the drag from China and Greece, has a better chance to hold its gain.

        Resistance today starts at DJIA: 17,749; S&P 500: 2,074; Nasdaq Comp.:4,980.

A rally failure today would be a bad sign and indicate lower process in coming weeks.

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THE FED

      The guessing game continues – Will the Fed bump interest rates up in September, or later ?

      Obviously, their decision will key on the strength of the U.S. economy where housing is taking the lead and now consumer expectations are soaring.

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My Technical Analysis of the 30 DJIA Companies:   LOWER

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  July 2,  a reasonable risk is 17,527; a more extreme risk is 17,380 The upside potential is has dropped with the market’s inability to follow through last week and is now 17,948. 

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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.

-Greece

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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