Raise a Little More Cash

Investor’s first read – Daily edge before the open
S&P 500:2,015
Nasdaq Comp.:4,728
Russell 2000: 1,066
Tuesday: March 16, 2016 8:51 a.m.
This is a big week for reports on the economy. Today: Wednesday: CPI and Housing Starts (8:30); Industrial Production (9:15) and the FOMC report (2:00) and press conference (2:30). Thursday: Jobless Claims, Philly Fed Business Outlook (8:30), JOLTS and Leading Indicators (10:00); Friday: Consumer Sentiment (10:00).
The FOMC reports at 2:00 a.m. today, followed by Fed Chief Janet Yellen’s press conference. A bump in interest rates is not expected, but expect one in April or June, and Yellen will confirm that is likely in her press conference. Employment and inflation data are beginning to support another hike soon.
Note: Fed speakers Friday: Dudley (9:00), Rosengren (11:00), and Bullard (3:00) Note: Bullard tends to be a “market mover !” (and I think he enjoys the role).
Briefing.com’s Patrick J. O’Hare called attention to a little known (appreciated) projection by S&P Capital I.Q. for 2016 earnings. S&P now projects earnings for S&P 500 this year to grow 1.7% vs. its January target of plus 7.4% . Q1 earnings are now projected to be down 6.8% from January’s projection of plus 1.2%. Q2 are projected at minus 2.0%.
If this is the case, the S&P 500, just 5.2% off its all-time high, is vulnerable to a serious correction.
The higher this market climbs, the riskier it gets for new buying.
I have urged traders to do some selling in recent days, and that goes for others who have profits and a small cash reserve.
Current levels of many stocks are not supported by fundamentals. Much of the gain since mid-February can be attributed to a normal bounce from an oversold condition, as well as a rebound in oil prices.
I think the latter is overblown. It is corporate earnings that really matter, and the trend is for them to fall far short of forecasts for 2016.
I have called this a “phony market” on numerous occasions in the past, and hold to that opinion.
In December, I forecast a top in early January and a rough year as a whole, though several buying opportunities. We had the top in January, and one buying opportunity. I expect a couple more corrections, one starting within a month.
The only game changer would be if Q3 and Q4 earnings are revised significantly higher in coming months. Currently, the revisions are down, not up..
SUPPORT ‘today”: DJIA:17,161; S&P 500:2,009 ; Nasdaq Comp.:4,711. Breaking this level raises chances of a drop to DJIA:17,026; S&P 500: 1,993; Nasdaq Comp.: 4,671.
RESISTANCE : “today”: DJIA:17,296; S&P 500:2,026; Nasdaq Comp.:4,752.
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
 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.
Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to mam.econoday.com.
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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