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 read– a 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”
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.