Volatility to Increase – Sharp Ups and Downs

Investor’s first read – Daily edge before the open
DJIA:17,602
S&P 500:2,049
Nasdaq Comp.:4,795
Russell 2000: 1,101
Friday: March 21, 2016 9:04 a.m.
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The FED
As expected, the Fed did not bump rates Wednesday, and indicated 2016 would involve two bumps instead of the originally planned four.
The Fed’s inconsistency is no surprise, but it has chipped away at its credibility – too much flip-flopping.
With no press conference scheduled for April, and no meeting in May, the next chance the Fed will have to bump rates is June.
THE U.S. DOLLAR (USD)
The ICE U.S. dollar index vs. a basket of 6 major currencies (symbol: DXY) appears to be the “drummer’ that oil prices and blue chip stocks are marching to.
Priced in U.S. dollars, crude oil and commodities rise when the dollar falls and vice versa. A weak dollar makes U.S. goods more attractive in foreign markets and can positively impact U.S. company earnings going forward.
EARNINGS
S&P Capital IQ is projecting S&P 500’s earnings in Q1 to drop 7.0% and Q2 to drop 2.1%. Earnings are projected to rise only 1.5%, down from a projection of plus 7.4% as recently as January.
Hopefully, a weak dollar will enable companies to post better numbers than currently projected. They will have to in order to justify the current level of stock prices.

TODAY:
My March 11 upside target for my technical analysis of each of the 30 Dow industrials (17,586) was reached Friday. The DJIA and S&P 500 have nearly recouped what was lost since the December peak from which stocks plunged, though the Nasdaq Comp. and Russell 2000 are lagging.
The market has momentum. For one, rising prices are encouraging investors to jump in with both feet. For another, A change in Fed policy adds fuel to the fire. Both have pushed stock prices up further than I ever expected.
Without unexpected bad news, the market should soon find a level where increasing volatility sets in with prices trading in a wide range up and down until late April when odds favor another correction as the election draws nearer.
Selective buying is warranted, as well as a healthy cash reserve.
European and Asian central banks are desperately attempting to generate more economic growth. These policies have not worked well for them and are not working well here either. That needs to be taken seriously. The economic numbers here are mixed, with a slight downward bias.
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SUPPORT ‘today”: DJIA:17,472; S&P 500:2,034; Nasdaq Comp.:4,776.
RESISTANCE : “today”: DJIA:17,676; S&P 500:2,059; Nasdaq Comp.:4,815.
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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 11, 2016, a reasonable risk is 17,073 a more extreme risk is 16,970. Near-term upside potential is 17,586
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 STATUS OF MARKET: Neutral – but vulnerable. Expect volatility
 OPPORTUNITY: RISK: Risk high, Profit taking justified.
 CASH RESERVE: 25% – 45%. Consider 75% now
 KEY FACTORS: Outlook for Q1, and 2016 earnings questionable.
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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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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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