Street Just Doesn’t Know What to Do

Investor’s first readDaily edge before the open

DJIA:  17,489
S&P 500: 2,050
Nasdaq  Comp:4,986
Russell 2000: 1,153

Wednesday:  Nov. 18, 2015   9:13 a.m.

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      The minutes from the FOMC meeting will be released at 2:00 today and will be parsed for any clue regarding a December bump in interest rates.

      Currently, the Street expects a rate increase, so any indication to the contrary will spike stock prices.

       I have long believed the first bump up in interest rates would be followed by a sharp but brief sell off, which would be followed by an even sharper rebound.

       That’s what I would expect if  it were people making decisions, not computers.

The surge in stock prices in October was driven by the suggestion that a rate increase would  come in 2016, not December. That changed last week when the perception changed to  a December increase, and the market gave back all of its October gain.

       This is insanity !  Actually, it’s scary.

       What are stocks worth without the Fed factor ?  We don’t know, because it’s all about the Fed, has been for years.

TODAY:

       Expect gains in early trading, as the Street awaits the FOMC minutes at 2:00 today. The Feds William Dudley spoke at 7:30 this morning, but there has been no feedback.

       Economic news was mixed today as MBA mortgage apps in the Nov. 13 week soared 12%, but Housing Starts for Oct. dropped sharply. The apps have it, since they are more recent. 

       The yo-yo effect will continue. A drop below DJIA 17,200 (S&P 500: 2,020) would be short-term bearish.  A rise above DJIA 17, 810 (S&P 500: 2,090) short-term bullish.

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SUPPORT “today”: DJIA: 17,426; S&P 500:2,038; Nasdaq Comp.:4,968

RESISTANCE “today”: DJIA:17,561; S&P 500:2,061;Nasdaq Comp.:5,006

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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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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  November 13, 2015,  a reasonable risk is 17,117 a more extreme risk is 16,856. Near-term upside potential is 17,630
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  • STATUS OF MARKET: Bullish but “at risk” of  a correction, especially Fed-based
  • OPPORTUNITY: RISK: Risk increases with higher market, but light on the Street is GREEN in spite of negatives.
  • CASH RESERVE: 25% – 45% depends on tolerance for risk.
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; Stimulus Europe/China a catalyst !!
  • CONCLUSION: Suddenly, odds of a December bump up in interest rates has increased dramatically. Over the years, the market has sold off when it appeared that an increase was imminent.  It did not do so after the announcement Friday, but did on Monday as the Street began projecting the timing of subsequent rate increases in 2016 – 2017.
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Note: Source of economic data

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

*Stock Trader’s Almanac

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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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