Traders Tempted, but…….

Investor’s first read Daily edge before the open

DJIA:17,402
S&P 500
: 2,084
Nasdaq  Comp.5,036:
Russell 2000: 1,271

Wednesday,  Aug 12, 2015   9:13

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TODAY:  The market is in a quandary with the Street trying to find a level for stock prices that discounts the new  uncertainty of China’s yuan devaluation, the old uncertainties  of mid-east  turmoil, oil prices, corporate earnings, Fed policy, Russia, Europe.  All this and a stock market that is a bit pricey.

     Huge amounts of leveraged money are being lobbed back and forth between bulls and bears like one of those medicine balls  in a gym.

     Normally, uncertainties like the ones listed above would crunch stock prices, driving them lower until the uncertainties were fully discounted. That threshold has not been crossed. If it is, we will see a freefall because everyone and every computer  on the Street will see it at the same time.

     So far, the Street has hung tough through worse negatives and run stock prices up to new highs, so the Bulls are not toast yet. There really isn’t anywhere else to invest.  That conclusion is still front and center, enabling stock prices to relentlessly press higher over six years.

     The markets are probing for a comfort level.  For over a month, I have targeted the fall (Sept./Oct.) as a buying juncture – still do, though a lot of spikes up in the interim.

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SUPPORT: 17,243; S&P 500: 2,084; Nasdaq Comp.:4,979.

      Traders can be on the alert for the “possibility” of a one-day reversal today where a big loss in early trading is reversed with stocks recouping all of the day’s loss.  

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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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  • STATUS OF MARKET: Bullish but vulnerable to a continued correction/consolidation into the fall
  • OPPORTUNITY: Volatility has set in, market reversed Friday after quick plunge and will be rebounding into resistance.
  • RISK: Above average with news sensitive market.
  • CASH RESERVE: 25%
  • KEY FACTORS:  Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; technical underpinnings weakening
  • CONCLUSION:  Big week for economic reports plus FOMC meeting and a report (no press conference) at 2:00 Wednesday.
  •  

SUMMARY  (No change)

     The biggest factor here is the U.S. economy.  Will it rebound from its reported Q1 slump, which most likely  was distorted by weather, oil prices, the impact of a strong US dollar, even seasonality ? So far, results are mixed. Yesterday’s news indicates softness in chain store sales and Consumer Confidence, but a bit of strength in PMI Services  and good strength in Richmond Fed Manufacturing.

     Recession does not look like a real risk, so much as a “pause” in the economy.    

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My Technical Analysis of the 30 DJIA Companies:  (As of 8/11)

 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. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages,
     As of  August 11,  a reasonable risk is 17,250; a more extreme risk is 17,056The upside potential is has dropped with the market’s inability to follow through last week and is now 17,758.

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KEY EXTERNAL FACTORS: 

-Devaluation of the Chinese yuan

-U.S. economy – rebound Q3 and Q4 ?

-Fed increase 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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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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