Street Eyes Sunday Oil Meet in Doha

Investor’s first read – Daily edge before the open
DJIA: 17,926
S&P 500: 2,042
Nasdaq Comp.: c4,945.:
Russell 2000: 1,128
Friday: April 15, 2016 9:07 a.m.
The Street heads into the weekend expecting good news coming out of the April 17 oil talks in Doha, Qatar. The freeze in oil production unofficially agreed to by Saudi Arabia, Russia, Qatar, and Venezuela, is expected to go ahead without a hitch.
Brent crude, the benchmark for global (sweet, light) crude is up 30% since the four agreed to agree Feb. 16. Iran’s participation could be a sticking point. Fifteen countries including members and non-members will meet in Doha Sunday.
It looks like good news is already discounted in the price of oil. Bad news isn’t ! A blow up or continuing uncertainty would hammer stock and commodity markets Monday.
So far, it looks like the Street is looking beyond Q1 earnings to Q4 when growth will appear to accelerate, mostly owing to a favorable comparison the weak showing in Q4 2015.
Companies will be issuing guidance for Q3 and Q4 from which analysts will issue projections. If revisions are lower across the board, the market will take a hit – higher, another leg up.
FactSet Research’s April 1 forecast revised Q1 earnings down to minus 8.5% (-3.7% ex energy) from a plus 0.8% projected in December. Of 121 company’s Q1 guidance, 94 have issued lower estimates. Currently, estimates for 2016 as a whole vary by source, but the trend appears to be downward revision.
Obviously, bad news out of Doha would rankle stock and commodity markets.
The market will go up sharply or down depends on what the Street sees for Q4 earnings and beyond, though in this uncertain environment any projections that far out would be suspect.
I expect a rough ride into year-end – several sharp moves down, but a few opportunities for traders to scalp a quick profit, and one major opportunity for longer tern buyers to enter, probably in the fall, if we get a big crunch.
While the Street may push prices higher based on currently perceived Fed policy, I think this market is working on an intermediate-term top. Whether that evolves into a bear market depends on whether new negatives hit the market when it is down.
SUPPORT “today”: DJIA:17,753; S&P 500:2,067; Nasdaq Comp.:4,893.
RESISTANCE “today”: DJIA:18,006; S&P 500:2,092; Nasdaq Comp.:4,967.
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 31, 2016, a reasonable risk is 17,664 a more extreme risk is 16,560. Near-term upside potential is 18,102
(I will repeat this regularly to keep readers aware of the potential for an April correction)
The market is tracking a pattern for presidential election years where an administration is in its second term.* The news is bad.
Historically, these markets have declined in Jan./Feb., rallied in March then topped out in early April, plunged in May with brief rallies in June and August and a plunge into October prior to the election.
This supports my December forecast of an ugly January, a rough year as a whole, but with several buying opportunities.
The stock market is constantly adjusting for fundamental, economic, monetary, fiscal, political, psychological and global outlook, moving higher or lower depending on how it is perceived, a process I refer to as seeking a comfort level.
This sifting process is what creates rallies and corrections, bull and bear markets. In seeking a comfort level, the market often hits extremes if only momentarily.
By propping stock prices with verbal hype and changing policy projections, the Fed has denied the market the normal processing of all the other factors that comprise value.
Buyers jump in on Fed hype, and sellers defer action, hanging in as long as the Fed is in there with positive feed.
When an event triggers a sudden break, all that deferred selling hits a market that does not have enough buyers to absorb it, and you get a freefall. Throw in some highly leveraged positions on the wrong side of the market, and you get an horrendous freefall.
With a meltdown looming in 2008/2009 and the S&P 500 down 50% , the Fed had to step in. But, there is no good reason for the Fed to be propping the market now after the S&P 500 has tripled from its bear market lows.
What it is doing is creating a highly vulnerable market, one that can devastate investors if the Fed hype suddenly fails to work.
Freefalls come out of nowhere. Before an investor can respond, markets can be down 3% – 5% en route to a 12% – 20% – 35% plunge.
Like a rogue wave, the next one will strike without warning.

 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 weekly economic calendar and good recap of indicators:
**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.

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