Q4 Surge ?

Investor’s first read Daily edge before the open

DJIA:  16,776
S&P 500: 1,987
Nasdaq  Comp.4,781:
Russell 2000: 1,141

Tuesday:  Oct. 6, 2015   9:09 a.m.

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      The surge in stock prices over the last two days was prompted by the prospect the Fed won’t be raising interest rates anytime soon, due to a slowing in the economy.

      The market has been marching to that drumbeat for most of the current bull market which started in March 2009.

       The Fed will begin to raise rates when the strength in the economy justifies it, and  recent indications are that is not in the cards this year. 

        Buying stocks based on the theory that bad economic news is good for the stock market, because it ensures the continuation of low interest rates is a highly dangerous policy.

       At some point, bad news becomes very bad news, and investors who bought thinking otherwise will get crushed by a bear market.

       This is the game of choice on Wall Street.  Investors can play – not play at all – or play fully aware the Street’s sentiments can change without notice.

TODAY: 

      Five days ago the market turned up, without fanfare initially, but robustly over the last two days, as investors became convinced that the Fed won’t raise rates soon and that  another leg down was not imminent.

      The bulls needed this sign of strength. 

       Part of it is seasonal,  Q4 and Q1 are historically bullish.*

       A new up leg will be confirmed by the intensity of buying from here. If the bulls are going to run the table, they will be buying on any weakness the market gives them.

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RESISTANCE today:  DJIA: 16,916; S&P 500: 2,003 ; Nasdaq Comp.: 4,826.

SUPPORT today:  DJIA: 16,636; S&P 500: 1,973; Nasdaq Comp.:4,747

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NOTE:  There is no FOMC meeting scheduled for November, and no press conference scheduled for October. If a press conference is suddenly scheduled for October, it will be a tip off to an announcement of a rate increase, likewise  for a meeting/press conference is scheduled for November.     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>    

WHAT THE FEDS SHOULD DO:

      What the Fed should do is what all of us investors, analysts, etc who have been in this for a while have learned to do  and that is to come out and admit they erred by inaction in the past and now with  implying a rate increase was likely by year-end. “We were wrong” –  Say it !  The numbers don’t justify it now.  Then  add, “When the numbers and international risks justify it we will raise rates, not before.”

      The Street is as much to blame as the Fed. It’s all about the Fed – Will it ? Won’t it ?  The Street  should get back to basics – the bigger picture – earnings one year out, not this asinine quarter-to quarter stuff; the big economic picture here and abroad, U.S. Governance, Corporate responsibility.

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  October, 2 2015,  a reasonable risk is 16,260 a more extreme risk is 16,155. Near-term upside potential is 17,164. 
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  • STATUS OF MARKET: Bullish but “at risk” of  a bear market.
  • OPPORTUNITY: Volatility has set in, market has rebounded from August’s “flash crash”  but will likely drop to a lower level.
  • RISK: Above average with news sensitive market.
  • CASH RESERVE: 25%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION:  Encouraged by the prospect the Fed won’t raise interest rates this year due to softness in the economy, the stock market has rebounded from a support level established after the August 24 “flash crash.”
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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 ( New edition should be out – get it !)

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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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