More Testing

Investor’s first read – Daily edge before the open
S&P 500: 2,063
Nasdaq Comp:5,098
Russell 2000: 1,159
Wednesday: Dec. 9, 2015 9:08 a.m.
As noted yesterday, trading in December is usually irregular with lots of false starts and fake-outs. It’s a tough market if you are keeping score every day. Stocks go down that should go up and vice-versa. Stocks can go lower than reasonable due to profit, or loss taking.
Yesterday’s market was a good example. It changed directions six times with a -inconclusive close.
Yesterday, the market tested last week’s lows of DJIA: 17,425 (S&P 500:2,042), and may do so again today. A break below those levels sets the stage for a sideways trading range going forward with support in the area of DJIA: 17,210 (S&P 500:2,020) and resistance around DJIA: 17,910 (S&P 500: 2,095),
If last week’s lows hold, look for a sharp rebound.
But in an irregular market of this sort, we can break supports that should technically hold. That’s part of this year end market inconsistency I have learned to dislike. What’s not supposed to happen – does, then as if nothing happened, it reverses. Oil is a drag on the market averages and to a lesser extent psychologically. What’s wrong with lower gas and heating prices ?
A spike below last week’s lows can happen with a test of November’s lows (DJIA 17,210 and S&P 500: 2,019). If that happens, see my “supports” below.
SUPPORT “today”: DJIA:17,451; S&P 500:2.047; Nasdaq Comp.:5,053
RESISTANCE ‘today”:DJIA: 17,653; S&P 500:2,073; Nasdaq Comp.:5,122
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.
The energy sector is down 20% year-to-date, forecasts are for lower prices and no rebound. I can see a selling climax in this sector at lower levels, but the ingredients are there. The sector will bottom out well before any news of stabilization. Beware of false rallies, one-day affairs that look like the turn, but yield to another leg down.
Right now some traders may be tempted to catch the falling knife. There will come a point when no one in hell would even think of buying anything to do with oil, that’s when they are a buy.

Pre-presidential election years have a record of being the best of the four-year election cycle with presidential election years running a close second. But the eighth year of a two-term presidency is the exception with the S&P 500 losing an average of 10.9% going back to 1901.*
This supports my expectation of a correction in January setting the precedent of a volatile year for stocks in 2016.
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 19, 2015, a reasonable risk is 17,580 a more extreme risk is 17,436. Near-term upside potential is 17,967
 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.
Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to
*Stock Trader’s Almanac
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
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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