Rebound Today Must Hold, or Else

Investor’s first read – Daily edge before the open
DJIA: 17,148
S&P 500: 2,012
Nasdaq Comp:4,903
Russell 2000: 1,1089
Tuesday: Jan. 5, 2016 8:54 a.m.
/////////////////////////////////////////////////////////////////////////////////////////////////////////
Institutions didn’t get a chance to tip their hand yesterday on how they see 2016. They tend to do that in January after all the year end portfolio adjustments are out of the way.
However the 7% plunge in the Chinese Composite (SHCOMP) prior to the open of trading yesterday triggered a plunge in global stock markets, the U.S. markets included.
At the worst yesterday, the DJIA and S&P 500 were down 2.6%, the Nasdaq Comp. down 3.2% before a rebound in the last hour of trading.
With the hysteria of China and another Mid-East flare-up off to the side for the moment, we will see what the BIG money thinks.
If institutions planned to buy in January, the magnitude of yesterday’s plunge clearly gave them a chance to step in. If these prices don’t lure them in, we are looking at a decline to levels that that excites them.
TODAY:
Yesterday’s late-day rebound was hurried, which is characteristic of short covering. However, we can’t assume there wasn’t some aggressive bargain hunting that won’t spill over into today’s trading.
In fact, based on my study of 50 key charts last night, the market could rally today either from the open or from a one-day reversal from lower levels hit before 11:00.
The China scare yesterday muddied the waters, denied us of an inkling of what the BIG money is thinking. We will get a feel for that in coming days.
If they see 2016 as a reasonably good year, they will waste no time in taking the market back well past the year-end close to attack peaks seen in November and December.
If not, I see a test of the August/September lows DJIA 15,370; S&P 500: 1,870; Nasdaq Comp.:4,292. These were flash crash lows. Initial support would come in a bit above those levels.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
SUPPORT “today”: DJIA:17,013; S&P 500:1,996; Nasdaq Comp:4,864.
RESISTANCE ‘today:” DJIA:17,287; S&P 500:2,028;Nasdaq Comp.:4,951 .
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>.
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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
ECONOMY:
This will be a big week for economic reports, but how much the Street cares now that the Fed has made its decision on interest rates is in doubt. Today, it’s the PMI Manufacturing report (9:45 a.m.); ISM manufacturing report and Construction Spend (10:00). Wednesday we get the ADP Employment report, PMI Services, Factory Orders and the ISM Non-Manufacturing report, Jobless Claims Thursday and the Employment Situation report Friday at 8:30. (SEE: mam.econoday.com for details).
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
OIL
I have been writing that 2016 is the year to buy oils. Developments in the Mid-East like the rift between Saudi Arabia, Bahrain, Sudan and the UAE and Iran may stabilize oil prices heading off a climactic washout of oil company stock prices.
The Saudi’s are playing a dangerous game. Too many big hitters getting hurt. Pressure from within out the outside will force them to trigger a price rebound, just like they triggered a plunge.
Whether oil stocks will get hit further depends on Mid-East conflict and whether institutions with a long-term horizon believe they are a bargain and step in.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
ELECTION YEAR MARKETS
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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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 January 4, 2016, a reasonable risk is 17,000 a more extreme risk is 16,776. Near-term upside potential is 17,346.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 STATUS OF MARKET: Bullish but “at risk” of a major correction in January.
 OPPORTUNITY: RISK: January plunge possible.
 CASH RESERVE: 25% – 45% depends on tolerance for risk.
 KEY FACTORS: Concern for the number and extent of additional bumps in interest rates by the Fed; strength of economic rebound; Outlook for Q3/Q4 earnings; Stimulus Europe/China a catalyst !!
 CONCLUSION: Fed bump in interest rates now official. While Fed has assured the Street additional bumps will be modest, doubts by some will have an impact.
//////////////////////////////////////////////////////////////////////////////////////////////////////////
Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to mam.econoday.com.
*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

Leave a Reply

Your email address will not be published. Required fields are marked *