Market Now Needs to Find a Comfort Level

Investor’s first readDaily edge before the open

DJIA:  17,730
S&P 500: 2,078
Nasdaq  Comp:5,095
Russell 2000: 1,184

Tuesday:  Nov. 10, 2015   8:58 a.m.

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      The chances that the Fed would bump its federal funds rate up in December  increased dramatically with the big spike in the jobs report last Friday before the open.

      The Street was stunned, but didn’t stampede for the exits when the market opened.  The market closed Friday practically unchanged.

      I offered two scenarios.

      If the Street has finally opted for a pick up in the economy vs. a continuation of low rates, stocks will edge up, especially if reports on the economy continue to improve.

      If there is a delayed reaction here, that a bump in rates is bearish, the market must sell off to a level that discounts the problems the Street believes will result from Fed action.

      Yesterday’s sell off suggests the latter, but a few more days will be needed to confirm that.

      The December FOMC meeting is two months away, a lot can happen to influence a Fed decision on rates one way or the other.

      This “will they” or “won’t they” dilemma has haunted the Street for years, creating a lot of volatility, and I imagine a lot of portfolio losses.

      The Fed doesn’t want to kill an economic recovery with an untimely rate increase, but if the wait long enough it will die on its own.

      Realistically, if the economy and stock markets cannot survive in face of one or several small rate increases, there is little hope for either.

      I do not trust the mentality of the Street. I have been writing about the stock market for many years, and this is a phony market, hanging by a thread.

      That said, the stock market is still capable of being pushed much higher  by a fixation on the Fed, and little else.

       Most  of us know, as soon as the first bump in rates is announced, the Street will begin worrying about the next with a return to the “will they/won’t they” dilemma all over again.

      Unfortunately, this is the meal investors are being served.  Eat it, or go hungry.     

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SUPPORT “today”: DJIA:17,621; S&P 500:2,066; Nasdaq Comp.:5,059

RESISTANCE “today”: DJIA:17,813; S&P 500:2,088; 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 7, 2015,  a reasonable risk is 17,731 a more extreme risk is 17,590. Near-term upside potential is 18,237.
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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.

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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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