Risk Level Very High

Investor’s first readDaily edge before the open

DJIA:  16,924
S&P 500: 1,994
Nasdaq  Comp:4,782
Russell 2000: 1,136

Thursday:  Oct. 15, 2015   9:09 a.m.

/////////////////////////////////////////////////////////////////////////////////////////////////////////
THE RISK:

      My Special Bulletin yesterday afternoon called for a 45% cash reserve, which is up from a bulletin issued Oct. 9 calling for  35% reserve.

      I am concerned that the correction that got underway Tuesday will get hit by new negatives along the way nasty enough that they will break the market down below the Oct. 2 level (DJIA: 16,013 and S&P 500: 1,871).

      Conventional technical analysis does not call for more than a  moderate correction at this point with a drop to the DJIA 16,475 (S&P 500: 1,951) area where the market would rebound. That is where I am concerned that new negatives will hit the market and trigger another leg down.

      The basing pattern launched after the flash crash on  Aug 24 is impressive, but there is something about this pattern that disturbs me.  It is “pretty” enough to be bullish, but just a little too pat.      

       One other point, perhaps the Street’s Achilles heel is it’s over dependence on Fed policy so much so, viable, time-tested measures of stock values are overlooked. Does it matter what corporate earnings do as long as the Fed doesn’t raise rates ?  Does it matter if the prospect of a recession here and abroad is real ?

      Of course, the risk I am referring to here can be reduced substantially if the major market averages rise above DJIA: 17,172; S&P 500: 2,022and the Nasdaq Comp.: 4,858. Even so, there is a lot of overhead supply above those levels.

      Finally, I think the risk is great enough to warrant a defensive position. Put another way, there are times it is better to be wrong with one’s money in their pocket. When risk vanishes, there are always opportunities for re-investment.

.……………………………………………………………………….

SUPPORT today:  DJIA: 16,831; S&P 500: 1,986; Nasdaq Comp.:4,756

RESISTANCE today: DJIA:17,019; S&P 500:2,004; Nasdaq Comp.:4,808

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 

SUMMARY:    

     Part of the blame for yesterday’s decline were comments by  Richmond Fed’s Jeffrey Lacker who has been for raising rates. He indicated he hasn’t changed his mind about the economy in spite of soft economic numbers. The Street concluded a rise before year-end is still possible.

     Opinions by Fed officials are all over the lot and have prompted sharp moves up and down in the market. While we would all be better off without their comments, shame on the Street for even listening to them.

      The sell off yesterday wasn’t as bad as the 157 point drop of  DJIA indicated, since 85 of those points were accounted for by a 6.70-point drop in Walmart (WMT) and 6.07 drop in Boeing (BA).

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>     

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.     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 

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.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

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 14, 2015,  a reasonable risk is 16,793 a more extreme risk is 16,527. Near-term upside potential is 17,137. 
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

  • STATUS OF MARKET: Bullish but “at risk” of  a bear market.
  • OPPORTUNITY: RISK: Above average with news sensitive market.
  • CASH RESERVE: 45%
  • 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.” It is now beginning to probe into an area from which it broke down in August where the upside should be more challenging.

//////////////////////////////////////////////////////////////////////////////////////////////////////////

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 !)

…………………………………………………………

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 *

This site uses Akismet to reduce spam. Learn how your comment data is processed.