Street Undecided – Resolution to be Dramatic (Up or Down)

Investor’s first readDaily edge before the open

DJIA: 17,849
S&P 500: 2,092
Nasdaq  Comp.: 5,068
Russell 2000: 1,261

Monday, June 8, 2015   9:17 a.m.

CONCLUSION

     A host of issues take turns confounding investors – BUY ?    SELL before a crunch ?

     In spite of  concerns about Fed policy, the economy, Russia, ISIS, Greece, Asian markets, valuations, and corporate earnings, the stock market remains near its all-time highs, with an incredible bull market  gain of 214% for the broad-based S&P 500.

     The Street simply doesn’t know what to think at this point.  So far, corrections have been brief, followed within a few days by enough buying to run stocks back up to  52-week highs.

     Worth noting, the Nasdaq Comp. and Russell 2000 Index rallied off  lows posted at the open Friday and closed at their highs for the day.

     The DJIA and S&P 500 also rallied of the lows in early trading but gave it all back and then some at the end of the day.

     This confirms what I noted last Monday when I noted the Street was opting for more risk.

TODAY

     The S&P 500 and DJIA need to find stability and the Nasdaq Comp and Russell 2000 need to hold Friday’s gains if the bulls are going to turn this market around with a chance of another leg up to new highs.

     A break down through the lower end of the four-month  trading range (DJIA: 17,600; S&P 500: 2,040; Nasdaq Comp.: 4,850 would signal an ugly correction.

     We have a little cushion before getting there, especially with the Nasdaq Index.

     Odds of the Street’s indecision being resolved on the upside favor the bulls, but only by a hair.

RISK:

      If suddenly the Street decides it’s time to stop buying and sell, we are looking at an 8% to 14% drop, or 1,430 – 2,500 points in the DJIA.  The reason would be, they would all see the downside risk at the same time and hit the exits, which under those conditions would be narrow, getting narrower.

GREECE (ugh – go away – please)

The consequences of Greece exiting the Eurozone are so dire, a compromise is likely. Not only would it be devastating to Greece’s economy, but its impact on global banking and financial circles would be dramatic. Don’t be surprised if this is a white knuckle one before resolution (this weekend ?)

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ALERTALERTALERT, etc.

     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.

     The DJIA and S&P 500 are unchanged since April 30.
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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” (0.1498588) to get the DJIA for those levels.
     As of  June 5, a reasonable risk is 17,763; a more extreme risk is 17,556 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,160.
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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
Q2 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.
Recent strength in employment and housing industry shifting concern from a weakening in the U.S. economy to enough strength to prompt an early bump up in interest rates.

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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