Market Vigil – Economy and Russian Nationalism

TODAY:

The initial thrust of buying yesterday was mostly short sellers covering their positions when it was obvious there was not going to be a plunge at the open. All four major market indexes posted all their gains in early trading but ran into a wall of selling throughout the day.

Yesterday’s Resistanceat DJIA: 16,260 (S&P 500: 1,862) will be broken in early trading with a near-term upside potential of DJIA 16,325 (S&P 500: 1,868).

Supportis DJIA: 16.200 (S&P 500: 1,854).    No room for a rally failure today.

   Friday is Quadruple Witching Day when contracts for stock index futures, stock index options, stock options and single stock futures expire.  The simultaneous expiration of all four on the same day can be disruptive, resulting a  wide swing in prices.  All four expire on the third Friday of  January, March, June, and September.

SUMMARY:

   While the Russia/Crimea situation has cooled down, the Street is still faced with a host of  negatives,namely the softness in the Chinese and Japanese economies and the possibility that the softness in the U.S. economy may NOT be as weather related as thought.

   All this and a market that has done little to adjust for adversity.

   Part of the strength in the U.S. market is attributable to expectations that the economy will emerge robustly from  winter with a big catch-up in retail, auto, corporate spend and housing.

   So far this week, the economic picture is mixed, though not as dire as  in January.

   Last week New York Fed president Bill Dudley said he believes severe winter weather  has shaved a full percentage point off the nation’s GDP in Q1, Beyond that, Dudley is optimistic since there will be less drag from federal spending cuts, improved household finances, and corporations that are awash in cash.

   Undoubtedly, a break in the winter weather will boost consumer optimism resulting in a surge of retail spending and firm stock prices.

   This transition is critical.  If  severe winter weather  scrunched economic activity, we should see a sharp rebound once warmer weather sets in.  If not, we have a problem.

   So far this week the picture is weak, with a modest gain in February’s Empire State  Manufacturing Index,  a solid gain in March’s Industrial Production, but a sluggish reading in  the Housing Market Index and Housing Starts suggests we will have to wait for more data.

Investor’s first read– a daily edge before the open

DJIA:  16,247

S&P 500:  1,858

Nasdaq  Comp.:  4,279

Russell 2000: 1,188

Tuesday, March 18, 2014,    9:14 a.m.

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 our recovery here.

      The Russian situation is serious, nationalism is running high.  With Ukraine and other former Russian “satellite” countries split to varying but significant degree ideologically, a portion speaking Russian, the prospect for civil war looms.

   Sanctions are about the only deterrent the West has, but Russia has cards to play other than military, since it has economic ties to Europe, especially Germany.

   On March 21,   Russian lawmakers will consider legislation allowing it to  incorporate areas in other countries where  residents want to secede in face of  a dysfunctional central government.

    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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GOLD in TIMES OF INTERNATIONAL UNCERTAINTY:

   InvesTech Research’s March 7 edition called attention to the fact gold prices and gold miners’ stocks are down significantly since October 2011 when it warned readers  gold prices were “bubblish”and the bullion and stocks should be avoided. InvesTech incurred the wrath of gold bug subscribers, but was proven prescient when  gold nosedived.

    After a devastating 36% plunge, InvesTech thinks the group deserves a close look, adding  Market Vectors Gold Miners ETF (GDX) to its Model Fund Portfolio and commenting favorably on Barrick Gold Corp. (ABX).

   GDX closed  Monday at $26.80 (52-week range of $35.58 – $20.24) and ABX at $20.45 (52-week range of $29.83 – $13.43).

   With tensions in Ukraine lessening, gold will continue to be under pressure, though

Down sharply from its October 2011 peak.

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THIS WEEK’s ECONOMIC REPORTS:

The economic calendar  features important reports reflecting trends in manufacturing and housing, as well as the big picture, the Leading Indicators.

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:

Empire State Mfg Ix. (8:30): Up slightly in Feb. to 5.61 from 4.48; New Orders  were 3.13 vs. minus 0.21 in Jan.

Industrial Production (9:15): Rebounded sharply 0.8 pct. in Feb. after a 0.2 pct decline in Jan.  Manufacturing led the charge with a 0.8 pct. gain after a 0.9 pct. loss in January.

Housing Market Ix. 10:00): Failed to rebound significantly, the index advanced one-point to 47 vs 46 in  Feb..

TUESDAY:

FOMC meeting begins, ends  Wednesday

ICSC Goldman Store Sales (7:45):

Consumer Price Ix. (8:30):

Housing Starts (8:30): Feb. Housing Starts were up ).2 pct. vs. an 11.2 pct. drop in January. However, Permits were up 7.7 pct. vs. a drop of 4.6 pct. in Jan..

WEDNESDAY:

MBA Purchase Apps (7:00):

FOMC announcements (2:00 p.m.):

Pres Conf. Fed chair Yellen: (2:30 p.m.):

THURSDAY:

Jobless Claims (8:30):

Philly Fed Svy (10:00):

Exiting Home Sales (10:00):

Leading Indicators (10:00):

FRIDAY:

Quadruple Witching Day

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RECENT POSTS:

Feb 28  DJIA 16,272 March Setting Stage for Spring Rally.

Mar 3   DJIA  16,321 Russian Bear Providing American Bull an Opportunity

Mar 4   DJIA 16,168  Crisis Almost Over – Easy Does it on Opening Prices

Mar 5   DJIA 16, 395 Street Reaching for Risk – Sneaky Strong

Mar 6   DJIA 16, 360 Selective – Stock Pickers’ Market

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

  George  Brooks

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

*InvesTech Research  – 406-862-7777 (www.investech.com) Truly one of the finest monthly market letters with a host of accurate economic and stock market indicators.

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The writer of  Investor’s first read, George Brooks,  is not 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.