Uncertainty Will Continue to Rule

Investor’s first read – Daily edge before the open
S&P 500: 2,146
Nasdaq Comp.:5,257
Russell 2000: 1,240
Tuesday, September 27, 2016 9:07 a.m.
-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 13.4%.
-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.
The Fed will be out in force this week. No fewer than ten Fed officials will speak at different times from different parts of the world.
Neel Kashkari and Robert Kaplan spoke yesterday. Wednesday brings Kashkari again, James Bullard (10:45 a.m.), Charles Evans (1:30 p.m.), Loretta Mester (4:35 p.m.), Esther George (7:15 p.m.); Thursday: Patrick Harker (5:00 a.m.), Dennis Lockhart (8:50 a.m.), Jerome Powell (10:00 a.m.), Janet Yellen (5:10 p.m.).
I am unsure what the full court press is all about, except it is a big week for reports on the economy, and of course, the aftermath of the debate. They may be laying the groundwork for a November rate increase.
There is little reaction in the futures market today in response to the debates last night. The market did a lot of discounting of uncertainty over the last three days.
We will really have to see how this plays out. It will also be important to see how the debates influence the polls. If the race remains tight, uncertainty will dominate the market. If not, the market will adjust up or down as a reflection of expectations of one administration of the other.
After last night’s debate, it still looks like Clinton has an edge, we will see if the Street has a problem with that.
The Fed will be out there in force this week seeking to hang on to its control of general trends in stock/bond prices.
They will be monitoring a host of reports on the economy this week, as they ponder an unlikely bump in rates at its Nov. 2 meeting.
Today’s economic reports: S&P Case Shiller Home Prices (9:00), PMI Services (9:45), Consumer Confidence (10:00), Richmond Fed Mfg. (10:00), State Street Investor Confidence (10:00). Check mam.econoday.com for more.
SUPPORT “today”: DJIA:18,016;S&P 500:2,140; Nasdaq Comp.:5,241
If these levels fail to hold, look for DJIA: 17,801; S&P 500: 2,137; Nasdaq Comp.: 5,227.
RESISTANCE “today”: DJIA:18,161; S&P 500:2,156; NASDAQ COMP.:5,278
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.
(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.
 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.
Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Bloomberg.com (Excellent pre-market read)
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
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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