Trader’s Buy

Investor’s first read Daily edge before the open

DJIA: 17,848
S&P 500: 2,094
Nasdaq  Comp.5,051:
Russell 2000: 1,265

Monday, June 15, 2015   9:11 a.m.

SUMMARY

     The Street’s dilemma  remains unresolved. What to do if the economy rebounds from the Q1 slump and what to do if it doesn’t.

      An economic rebound heightens the likelihood the Fed will begin to raise its benchmark interest rate sooner than if the economy fails to gain traction.

      The Street prefers a delay in higher interest rates.  While a bump would be tiny, it would  signal an inevitable change in Fed policy with more bumps up in time.

       The Fed is unlikely to raise rates if the economy slumps further, an environment that would not be positive for stocks.

       Last week’s employment and retail numbers were upbeat.  This week will bring production, employment and housing reports, as well as the minutes from the FOMC meeting and Fed Chief Yellen’s  press conference Wednesday at 2:30.

TODAY:

Greece has four days to agree to on  terms that would keep it in the euro. Failure would have dire consequences on Greece and have an adverse impact on Eurozone countries.

      Common sense says there will be a compromise and another impasse put off to a later date.

      Default would trigger uncertainty and a brief sell off in global stock markets, but a recovery.

      Likewise with the first bump in interest rates.  A sell off followed but a rally.

TODAY’S SUPPORT:  DJIA: 17,788; S&P 500: 2,082; Nasdaq Comp.: 5,013

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TRADING RANGE

     The four month trading range intact since February is (DJIA: 17,600 to 18,300; S&P 500: 2,040 to 2,130; Nasdaq Comp.: 4,856 to 5,100).

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THE FED

     The FOMC meets next week, so the Street will ponder the possibilities of a bump up in interest rates. The action in the bond markets indicates major concern that rates are rising sooner rather than later.  The iShares 20+year T-bond ETF (TLT) has dropped 16% from its February 52-year high and is now back to October 2014 levels.          

     The surge is stock prices yesterday raises doubts that a rise is coming shortly even though the TLT continued to move up.

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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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