Will Street Cheer GDP “Miss” ?

Investor’s first readDaily edge before the open

DJIA:  17,779
S&P 500: 2,090
Nasdaq  Comp:5,095
Russell 2000: 1,178

Thursday:  Oct. 29, 2015   8:44 a.m.

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      The message from the FOMC meeting at 2 o’clock yesterday was “moderate growth and it’s considering a December hike in interest rates. It did omit concern for “global risks,” which reportedly was the catalyst for a surge in stock prices and interest rates.

      The Street was delighted that the  Fed didn’t bump rates, though no one expected it to, and without a scheduled  Fed meeting in November it gets two months angst-free.

      The DJIA, S&P 500, and Nasdaq Comp. are all beginning to challenge this year’s highs.  The smaller company Russell 2000 has a lot of catching up to do.

      Once again the Street is getting its “Buy” signal from the Fed’s decision to delay an interest rate increase.  This “signal” is becoming so automatic, one has to wonder how the Street will react when the Fed does bump rates up.

       Without a “buy” signal from the Fed, the Street’s computers may signal “sell,” and hold that position long enough for a lot of damage to be done.

      No sweat for now. Unless the Fed calls a special meeting in November, a bump cannot occur until December 16.

       For the time being, I am sticking with the DJIA’s upside target set below in “My Technical Analysis of 30 DJIA Companies  at 18,045.

       Yesterday four Dow stocks accounted for half of the 198-point gain, though 27 of the 30 were up.

       The first Q3 annualized growth estimate for GDP came at 8:30 today and was 1.5%, compared with 3.8% in Q2.  The Q3 number will be revised several times going forward, but this number fell short of projections.

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SUPPORT “today”: DJIA:17,663; S&P 500:2,076; Nasdaq Comp.:5,061

RESISTANCE “today”: DJIA: 17,845; S&P 500:2,098 ; Nasdaq Comp.:5,114

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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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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  October 14, 2015,  a reasonable risk is 17,510 a more extreme risk is 17,430. Near-term upside potential is 18,045.
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  • STATUS OF MARKET: Bullish but “at risk” of  a correction, especially Fed-based
  • OPPORTUNITY: RISK: Risk increases with higher market, but light on the Street is GREEN in spite of negatives.
  • 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:  Encouraged by the prospect the Fed won’t raise interest rates this year due to softness in the economy, the stock market has exploded from a consolidation area established after the August 24 “flash crash” and has penetrated deep into a resistance area developed when the market broke down  in August.

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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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