Wild Two Weeks Ahead

Investor’s first read – Daily edge before the open
DJIA:17,128
S&P 500: 2,005
Nasdaq Comp:4,923
Russell 2000: 1,121
Monday: Dec. 21, 2015 8:28 a.m.
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The market didn’t sell off after the Fed announcement last Wednesday as I expected, but it did sell off Thursday and Friday, big-time.
I have been expecting two things to happen in coming weeks. I expected a year end rally of sorts as institutions structure portfolios for 2016, but I also expected a sharp correction starting in the first week of January.
It is possible the January correction has already started, however, with stock index futures trading up big prior to the open today, it is possible the year end rally is starting now.
The selling and buying last week and continuing into this week has been magnified by the fact institutions had to wait for the Fed decision on interest rates to be “official” before they could place orders. Then too, last week’s activity was also impacted by Quadruple Witching Friday when index futures, index options, stock options and stock futures all expire on the same day.
Selling will continue as institutions scramble to adjust portfolios for 2016 after the Fed decision Wednesday. But there will be buying as well as institutions reinvest the proceeds from their recent sales and invest new monies that come in at year-end.
An exciting two weeks ahead !!
This is a big week for reports on the economy (see mam.econoday.com) for details.
Oil STOCKS (See below).
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SUPPORT “today”: DJIA:16,956; S&P 500:1,985; Nasdaq Comp.:4,875
These supports are low only assuming the remote possibility of a rally failure
RESISTANCE “today”:DJIA:17,347; S&P 500:2,033; Nasdaq Comp.:4,985
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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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OIL
I am not an expert on oil or commodities, not even close, but basic industries in a free fall will eventually become attractive either by way of a change (or perception thereof) in the fundamentals or extreme undervaluation as a result of emotional /panic selling.
The severe plunge in Brent and West Texas Intermediate crude oil prices over the last 18 months has crushed oil stocks and the stocks of related industries.
The potential exists for a selling climax in these stocks as negative press and industry forecasts gain momentum forcing investors to simply dump these stock, funds and ETFs indiscriminately, hammering prices down to a point they attract enough bargain hunters to stabilize prices.
There can be false rallies along the way sucking traders in prematurely, creating losses within hours, days. These are usually triggered by rumors or commentary by industry sources, mainly OPEC..
Timing buys can be treacherous even for the pros.
Whether oil stocks will get hit this hard depends on whether institutions with a long-term horizon believe they are a bargain and step in.
There is an opportunity shaping up for those who can afford the risk.

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ELECTION YEAR MARKETS
Pre-presidential election years have a record of being the best of the four-year election cycle with presidential election years running a close second. But the eighth year of a two-term presidency is the exception with the S&P 500 losing an average of 10.9% going back to 1901.*
This supports my expectation of a correction in January setting the precedent of a volatile year for stocks in 2016.
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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 DJIA “divisor” (0.149677) 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 December 11, 2015, a reasonable risk is 17,023 a more extreme risk is 16,643. Near-term upside potential is 17,611.
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 STATUS OF MARKET: Bullish but “at risk” of a major correction in January.
 OPPORTUNITY: RISK: Risk increases with higher market, but light on the Street is GREEN in spite of negatives. January plunge possible.
 CASH RESERVE: 25% – 45% depends on tolerance for risk.
 KEY FACTORS: Fed decision on rates; strength of economic rebound; Outlook for Q3/Q4 earnings; Stimulus Europe/China a catalyst !!
 CONCLUSION: Fed bump in interest rates now official.
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Note: Source of economic data
For a weekly economic calendar and good recap of indicators, go to mam.econoday.com.
*Stock Trader’s Almanac
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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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