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Rounding Top or Base for Big Upmove?

By  +Follow April 1, 2014 6:15AM
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   Fed chief Janet Yellencan be credited with the ability of the market to hold its solid gain yesterday. In a speech in Chicago at 9:55, Yellen assured the Street the Fed will hold interest rates low”for some time,” in order to stimulate borrowing, spending and economic growth.

   Yellen noted the Fed’s unemployment target going forward would be 5.2% to 5.6% before considering  higher rates.

TODAY:

   Yesterday’s surge in stock prices tipped the scales slightly in favor of the bulls. Part of the surge  is in response to Yellen’s speech re-affirming the Fed’s low interest rate policy.

   Part of  it may be institutions jumping the gun on a spring rebound.

   Worth noting, the ICSC-Goldman’s same store sales for  the week ending March 29  jumped  3.6% in spite of winter weather !!

   This is a big week for reports on the economy (see below). While many will still reflect the adverse impact of severe weather, better-than- expected numbers will boost optimism.

   The market hit my secondary resistance level yesterday and stands to top  those levels at the open today at DJIA 16,480 (S&P 500: 1,875) and  attack the DJIA: 16,524 (S&P 500: 1,881) area.

    Support is DJIA: 16,408 (S&P 500: 1,870).

    Rally failures have characterized this market’s trading patterns for two weeks, indicating wariness by institutions to buy aggressively, even sell into strength.

    That pattern must be broken, if the bulls are going to launch a surge from here.

    I have been expecting a surge in stock prices in April, triggered by a spring thaw in consumer spending plans.  Without it, the stock market is headed south.

   Yesterday’s sharp rise may have been the beginning. What is needed now is an attempt to decline.  Failure to gain momentum would signal that the bulls are preparing to buy aggressively.

Investor’s first reada daily edge before the open

DJIA:  16,457

S&P 500: 1,872

Nasdaq  Comp.:4,198

Russell 2000: 1,173

Tuesday,  Apri1, 2014,    9:16 a.m.

SUMMARY:

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ANOTHER 6% + CORRECTION BEFORE MAY  - UNLIKELY

   One of the Stock Trader’s Almanac’s great discoveries is the fact the stock market’s performance during thesix months between November 1 and May1 is far superior to the six months between May 1 and November 1.* The Almanac  refers to it as the “Best Six Months.”

   Over of the last 25 years, the “Best Six Months” has produced 19 up-years, 3 flats and 3 downers. The best years averaged gains of 11.8% with the best year up 25.6% (1998 – 1999).

   Over the last 25 years,  there have been14 corrections ranging between 6% and 16%, but more than one correction of this size during the Best Six Months was rare.

   In 2002 there was a 6.2% correction in January and a 6.5% correction in March/April.  In 2003, there was a 7.0% correction in Nov. 2002/December 2002 and  a 12.9% correction in January/March of 2003.

   So far, the DJIA is ahead  6.0% since October 31, 2013 even with a 7% correction in the interim.  Another correction exceeding  6% is of course possible, but unlikely.

EUROPEAN ECONOMIES:

   Manufacturing output , new orders and exports are  up for the eighth consecutive month, suggesting its recovery is real, though not yet robust. Our economy has

scratched and clawed its way out of  a horrendous recession without help from Europe.  Obviously, a recovery there stands to  accelerate the pace of  our recovery here.

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    TECHNICAL ANALYSIS EACH OF 30 DOW STOCKS:

   At key junctures, I technically analyze each of the 30 Dow Jones industrials for a reasonable near-term  downside and a more extreme downside, as well as a near-term upside potential. I note the price for each, add them up and divide by the DJIA divisor (0.1557159) and arrive what the DJIA would be if each of the 30 stocks hit my targets.

   As of  Thursday’s close I concluded a reasonable near-term downside  for the DJIA was 15,900, a more severe near-term  downside would be 15,625. The near-term upside would be 16,511.  That’s all assuming the overall news environment doesn’t change.

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HOUSING STOCKS – Watch housing stocks for a clue to the direction of the economy.

    As spring approaches, the Street will be dissecting every morsel of  economic data in search of how much of the recent slowdown in the economy is attributable to severe weather.

   A logical place to snoop is the housing industry and stocks since they should firm up before the industry stats confirm a rebound

 PARTIAL LIST: 

Beazer Homes(BZH)  Friday: $20.08

PulteCorp(PHM) Friday: $19.19

Toll Brothers (TOL) Friday: $35.90

KB Homes(KBH) Friday: $16.99

DR Horton(DHI) Friday $21.65

CONCLUSION:

   Not only can sudden strength in these stocks signal an economic improvement, they can offer an opportunity, and should be tracked closely. If a green light is, imminent, the BIG money will be buying ahead of the news.  

   Some firming in BZH, PHM and TOL, but  nothing yet in KBH and DHI. If this group enters  “recovery mode” it will sizzle, otherwise flat and lethargic.

  

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THIS WEEK’s ECONOMIC REPORTS:

The economic calendar this  features important employment, manufacturing, service industry reports, however these reports may still be adversely impacted by severe weather conditions.

For detailed analysis of both the U.S. and Foreign economies along with charts, go towww.mam.econoday.com. Also included is an explanation of each indicator. If you want to know when the next Employment report or any other key report will be released that info is also there under “event release date.”

MONDAY:

Chicago PMI (9:45): Index dropped in Mar. to 55.9 from 59.8 in Feb..

Dallas Fed Mfg. Svy.(10:30) Rose sharply in Mar.  to 17.1 from 10.8 in Feb.

TUESDAY:

Motor Veh. Sales: Feb.’s month/month now at an annual rate of 15.3 million light motor vehicles vs. 15.2 in Jan.

ICSC Goldman Store Sales (7:45): Same store sales  for Mar. 29  week up 3.6 pct. in spite of winter weather. Year/year distorted by late Easter.

PMI Mfg. Ix. (9:45):

ISM Mfg. Ix. (10:00):

Construction Spend (10:00):

Global Mfg. PMI (11:00):

WEDNESDAY:

MBA Purchase Apps (7:00):

ADP Employment Report(8:15):

Factory Orders (10:00):

THURSDAY:

Int’l Trade (8:30):

Jobless Claims (8:30):

PMI Services Ix. (9:45):

ISM Non-Mfg. Ix. (10:00):

FRIDAY:

Employment Situation (8:30):

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RECENT POSTS:

Mar 7   DJIA 16,421  Pivotal Day in the Market

Mar 10 DJIA 16,452  Important Test for the Bulls Today

Mar 11 DJIA 16,418 Gold Due For a Play ?

Mar 12 DJIA 16,351  Crimea – How Big A Negative for Stocks ?

Mar 13 DJIA 16,340  Correction to Set Up An Opportunity

Mar 14 DJIA 16,108  Selling Climax Next Week ?

Mar 17 DJIA  16,065 Rally Failure Risk, But Trader’s Buy Looms

Mar 18 DJIA 16,247  Market Vigil – Economy and Russian Nationalism

Mar 19 DJIA 16,338  A Spring Break for the Economy ?

Mar 20 DJIA 16,222  Fed Reality – Market Up, or Down ?

Mar.21 DJIA 16,331  Yellen, Putin, Economic Freeze, Quadruple Witching Friday

Mar 24 DJIA 16,302  BIG Test for the Market Today

Mar 25 DJIA 16,276  Bull Top Unlikely - Why

Mar 26 DJIA  16,367 Bulls Must Beat Key Resistance Level

Mar 27 DJIA  16,268 Rally Failures = Lower Prices – Opportunity ! 

Mar 28 DJIA  16,264  April/May Surprise Surge ?

Mar 31 DJIA  16,323  CONFIDENCE Calls the Shot – April Opportunity ?

A Game-On Analysis, LLC publication

George  Brooks, Sole Member,Manager

“Investor’s first read – an edge before the open”

This email address is being protected from spambots. You need JavaScript enabled to view it.

The writer of  Investor’s first read, is  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 investment advice or 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 decisions in keeping with their tolerance for risk. Brooks may buy or sell stocks referred to herein.

 

 

 

 

 

 

 

 

 

 

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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By  +Follow April 1, 2014 6:15AM
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