Who Is Winning the Tug of War Now ?

Investor’s first read – Daily edge before the open
S&P 500:1,979
Nasdaq Comp.:4,648
Russell 2000: 1,067
Wednesday: March 9, 2016 8:48 a.m.
The bulls gave it a good effort yesterday, rallying the market after an early sell off. Sellers were waiting to stop the rally and drive stocks down close to the lows for the day.
The market has had a good run (9.3%) since its February low (DJIA:15,503; S&P 500: 1,810), so a correction is normal. That happens to coincide with the market running into resistance in the area from which broke down in January, generally a bit above DJIA 17,000 and S&P 500: 2,000.
With the market poised to open higher today, the bulls will be giving it another go.
A lot can be learned by attempts by the bulls and bears to move the ball at key junctures. Another failure to close on the upside, worse yet sell off sharply at the close, suggests a correction.
Should the bulls win the joust, the uptrend that started in mid-February has further to go as it probes deeper into resistance.
After the 13% plunge in January, the market has sought equilibrium, a comfort level, where there are uncertainties of a presidential election year, an iffy economy here and abroad, volatile commodity prices, and concern that the Fed may bump rates more than once this year.
From here it is a tug of war with the potential for a big move one way or the other.
One issue that hasn’t gotten much attention is corporate earnings, especially those projected for Q3 and Q4, where the Street has expected a big rebound.
Short-term, the Street will be focused on the Fed and what it does with interest rates next Wednesday. Odds favor a “pass.” More importantly though will be what Fed Chief Janet Yellen say in her press conference 2:30 Wednesday.
SUPPORT “today”: DJIA:16,870 ; S&P 500:1,968; Nasdaq Comp.:4,623
RESISTANCE : “today”: DJIA:17,036; S&P 500:1,987; Nasdaq Comp.:4,672
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
 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.
Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to mam.econoday.com.
*Stock trader’s Almanac
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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