Traders Lighten Up – Buyers Very Selective

Investor’s first read – Daily edge before the open
DJIA:17,073
S&P 500: 2,001
Nasdaq Comp.: 4,708
Russell 2000: 1,094
Tuesday: March 8, 2016 9:06 a.m.
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The market is presently running into selling with major overhead supply starting around DJIA 17,176; S&P 500: 2,021; Nasdaq Comp.: 4,796. That’s where the market started to break down in January.
With enough momentum, the market can penetrate that area more deeply, and with unexpectedly good news blow through it.
That is unlikely this year, though there is a possibility the market will press up irregularly into late April when the odds increase significantly for it to slide into a correction. The six months between May 1 and November 1 pale compared with the November to May six months.*
As noted before, the Jan./Feb. rebound is a mirror image of the Sept./Oct. 2015 rebound from its “flash crash” low.
What would trigger a drop before then ?
Downward revisions in Q3 and Q4 earnings, for one. Fed action to increase rates this month (15th), for another. Oil may lose its recent luster as the reality sets in that a freeze is not a production cut. While the Fed is not expected to bump rates next week, comments by Fed Chief Janet Yellen in her 2:30 press conference may indicate more rate increases are on the horizon.
Of the three, earnings have the greatest potential to crunch the market if projected worse than expected, especially Q3 and Q4. If the unexpected happens, and suddenly the Street revises earnings higher, all bets are off. Currently, I am not comfortable with any projections I see – too early
TODAY:
While the DJIA was up yesterday, the S&P 500 was flat and the Nasdaq Comp. was down.
Today will open lower. What is important to watch here is, will the bulls jump on slightly lower prices, or have prices run too far in a short period of time without a correction.
The fear of a bear market has faded, though still a strong possibility. A greater possibility is there will be more plunges in the market in face of a host of uncertainties, not the least of which is the election in November.
I see no good reason to chase rising stocks in this environment. Traders with nice gains can consider taking some of their profits on any strength.
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SUPPORT “today”: DJIA:16,955; S&P 500:1,992; Nasdaq Comp.:4,681
RESISTANCE : “today”: DJIA:17,127; S&P 500:2,007; Nasdaq Comp.:4,721.
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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 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 March 2, 2016, a reasonable risk is 16,716 a more extreme risk is 16,651. Near-term upside potential is 17,134
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 STATUS OF MARKET: Bearish – but trying to turn. Expect volatility
 OPPORTUNITY: RISK: Risk high, but opportunity for traders at lower levels.
 CASH RESERVE: 25% – 45%. Consider 75% now
 KEY FACTORS: Fear taking hold. Concern for the number and extent of additional bumps in interest rates by the Fed; strength of economic rebound; Outlook for Q1, and 2016 earnings as a whole.
The Street is counting on a big jump in Q3 and Q4.
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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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