Street In a Quandary – Seeks New Levels

Investor’s first readDaily edge before the open

DJIA: 17,348
S&P 500: 2,079
Nasdaq  Comp.5,019:
Russell 2000: 1,202

Thursday,  Aug. 20, 2015   9:09 a.m.

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CONCLUSION: 

      Normal, easily forgotten, corrections can develop into ugly ones if new negatives crop up as the expected rebound is about to develop. The same can happen if existing negatives suddenly worsen.

       Oil prices continue to drop, China’s stock markets tumble further and the yuan is devalued, Europe’s economic woes increase, and international hotspots (mid-east, Korea) heat up.

        All this makes it difficult for the Street to find a level where it feels comfortable buying in size.

       No one has a clue when the Fed will bump interest rates, including the Fed, which is beginning to create a serious credibility problem.

       TODAYOdds are increasing that the market has to probe lower until that level is found  and that process can get SCARY !

        First you hit the “ouch” point where the decline hurts enough to move everyone to the exits with some bailing out.

        That yields to the “I can’t stand it anymore” point where everyone hits the exit absolutely sure the market will crash.  

        That’s the buying juncture, though human nature (fear) prevent most investors from buying.

        The Bulls are still trying to hold the line, making forays into the market, but unable to follow through.

        Pre-market trading indicates a soft open, which may even turn into a rally.

Unless that rally is a powerhouse with heavy volume, it will fail and the market will decline once again.

        SUPPORT: DJIA:17,270: S&P 500: 2,068; Nasdaq Comp.: 5,001

        RESISTANCE: DJIA 17, 458; S&P 500: 2,089; Nasdaq Comp.:5,051

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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.
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  • STATUS OF MARKET: Bullish but vulnerable to a continued correction/consolidation into the fall
  • OPPORTUNITY: Volatility has set in, market reversed Tuesday after quick plunge and will be rebounding into resistance (again).
  • RISK: Above average with news sensitive market.
  • CASH RESERVE: 25%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION:  Big week for economic reports plus FOMC meeting and a report (no press conference) at 2:00 Wednesday.
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SUMMARY 

     The biggest factor here is the U.S. economy.  Will it rebound from its reported Q1 slump, which most likely  was distorted by weather, oil prices, the impact of a strong US dollar, even seasonality ? So far, results are mixed. Yesterday’s news indicates softness in chain store sales and Consumer Confidence, but a bit of strength in PMI Services  and good strength in Richmond Fed Manufacturing.

     Recession does not look like a real risk, so much as a “pause” in the economy.   

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My TECHNICAL ANALYSIS  of the 30 DJIA Companies:  (As of 8/1).

 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” (0.1498588) 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  August 19,  a reasonable risk is 17,150; a more extreme risk is 1,943. Near-term upside potential is 17,520. Friday’s stability improved the low/high numbers here.

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KEY EXTERNAL FACTORS: 

-Devaluation of the Chinese yuan

-U.S. economy – rebound Q3 and Q4 ?

-Fed increase in interest rates

-Potential armed conflict korea

Note: Source of economic data

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

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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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