The Countdown Has Begun

Investor’s first read – Daily edge before the open
DJIA:18,308
S&P 500: 2,168
Nasdaq Comp.:5,312
Russell 2000: 1,251
Monday, October 3, 2016 9:11 a.m.
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WHAT COULD HURT THE MARKET
-The uncertainty created by a dead heat in the race for the presidency.
-Q3 earnings reports in October, which are expected to mark the sixth straight quarterly decline for the S&P 500.
-a downward revision of 2017’s S&P 500 earnings, currently expected to increase 13.1%. Oil industry earnings have been crushed over the last two years, punishing the S&P 500 earnings as a group. But, based on $55 WTI oil price projections, the oil industry stands to give back to the overall earnings for the 500, generating a 13.1% gain in 2017. We’ll see.
-if the Street suddenly realizes Fed doesn’t have an exit strategy, never did.
-a recession in Europe. Numbers starting to stink. Markit flash Eurozone PMI at 20-mo. Low Sept; Germany PMI service sector slowest 16 mo..
Reportedly, three-quarters of UK CEOs surveyed by KPMG are considering relocating HQs due to Brexit. The British pound has been getting pounded.
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TODAY
The market has been buying time since mid July, juggling the uncertainty of an election and Fed decision on interest rates. August consumer spending took a break after four good months. Durable goods, including vehicle sales did likewise. There are signs inflationary pressures are edging up. August’s PCE price index rose 0.1 percent. This brings the year/year PCE core to 1.7 percent a bit closer to the Fed’s 2 percent target.
The Street (and Fed) will be watching Wednesday’s ADP Employment report (8:15 a.m.) for clues to the all-important Employment Situation report Friday (8:30 a.m.).
Historically, the November 1 to May 1, six month period is a boomer for stocks.
The bull run is never in a straight line, but impressive. If the uncertainties of an election outcome and Fed decision on rates depresses stock prices in advance of November 1, it would be an attractive buying opportunity.
The summer is behind us, decision makers are back to work, and it is time to dig the cleats in for some serious market action going forward.
The pattern is positive. That would be confirmed if buyers step in on weakness. A drop below DJIA 18,050 and S&P 500: 2,140 would signal trouble.
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SUPPORT “today”: DJIA:18,241;S&P 500:2,161; Nasdaq Comp.:5,296
RESISTANCE “today”: DJIA:18,418; S&P 500:2,186; NASDAQ COMP.:5,344
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NEW PROJECTION:
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 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 September 16, 2016, a reasonable risk is 18,011 a more extreme risk is 17,908 Near-term upside potential is 18,435.
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ELECTION YEAR PATTERN BEARISH AFTER MARCH
(So far this is not holding up)
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.
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 STATUS OF MARKET: Neutral – but very, very vulnerable. Expect volatility
 OPPORTUNITY: RISK: Risk high, Profit taking justified.
 CASH RESERVE: 45%. Consider 75% now if tolerance for risk is low.
 KEY FACTORS: Outlook for Q3, and 2016 earnings questionable with strong U.S. dollar. Forecasts for 2017 still for a gain in S&P 500 earnings of 13.4%. It has been there for months in spite of deteriorating earnings this year. Any downward revision could impact the market significantly.
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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Bloomberg.com (Excellent pre-market read)
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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
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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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