Speculative Fever Mounting

Investor’s first readDaily edge before the open

DJIA: 18,162
S&P 500: 2,123
Nasdaq  Comp.5,106
Russell 2000: 1,254

Thursday, May 28, 2015   9:06 a.m.

SUMMARY:

     Tuesday, I headlined, “Correction Possible – Great Trading Opportunity,” and the DJIA plunged 190 points.

     Yesterday, I indicated that I expected a follow through with the market finding a bounce point this week possibly from a level as low as DJIA:17,900  (S&P 500: 2088; Nasdaq Comp.: 4,982) area  (a trading opportunity !).

     Didn’t happen. The market rebounded sharply with the DJIA and S&P 500 regaining Tuesday’s loss.

SPECULATIVE FEVER ?

     More important than the overall rebound, was the fact the Nasdaq Comp. and small-company Russell 2000 not only recouped all of Tuesday’s loss and ran much further with the Nasdaq hitting an all-time high.

     This indicates a hunger for bigger gains but at  greater risk, something characteristic of  bull markets that trend to greater and greater speculation.

     The final stage of bull markets can feature outlandish speculation where easy money  is made in grossly over-valued story stocks before the plug is pulled.

      Speculation can be so over-the-top, the less one knows, the more money they can make (to a point).

      Small cap stocks have done well so far in this bull market with the Russell 2000 rising 266%.

      But, I don’t see the classic signs of the small investor jumping in with abandon, so this Bull could run much further (corrections along the way).

      This is would be the,  “I can’t stand it anymore,” phase where bull markets eventually suck everyone in – unfortunately close to the top.

      This is human nature:  fear at bottoms – greed at tops.

TODAY:

      Expect some selling in early trading with some buying to show up around DJIA:18,094; S&P 500: 2,114; Nasdaq Comp.: 5,064. 

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ALERTALERTALERT

     The six months period between Nov. 1 and May 1 has historically been the best six months for the stock market.* The six months between May 1 and Nov. 1 has underperformed. Consistent as this seasonal pattern has been, it must be noted that opportunities to trade against these trends have occurred often.  Analysts and the press will make a lot of noise about this phenom in coming months –  be careful.
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My Technical Analysis of the 30 DJIA Companies:  

On occasion, I technically analyze each of the 30 DJIA stocks  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” (0.1498588) to get the DJIA for those levels.
     As of  May 22, a reasonable risk is 18,120; a more extreme risk is 17,990 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,511. Yesterday’s drop reduces this number to “unlikely.”

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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
-Q1 earnings for some companies will suffer from U.S. dollar’s strength and plunge in oil prices.
-Market still keyed on the Fed and it’s first bump up in interest rates, which with a slight softening in recent economic reports looks like it may happen later rather than sooner.
Concern that the U.S. economy is beginning to slump. This week is mixed.

Note: Source of economic data

For a weekly economic calendar and good recap of  indicators, go to mam.econoday.com.

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*Stock Trader’s Almanac

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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