Monday, October 27, 2014 9:03 a.m. DAILY BEFORE the OPEN
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Daily:Boiling down fundamental, technical, economic,
monetary, fiscal, psychological, and seasonal data into a quick read.
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This can be a very defining week for Wall Street.
Unless the Fed decides to extend bond-buying program at its FOMC meeting Wednesday, its stimulus from this source will end this month.
The big question is, can the Street wean itself off continued stimulus by the Fed, or will it be consumed by an anxiety attack, fearful that higher interest rates are not far off ?
The Fed’s taper out of QE began in January, so the Street has had enough time to adjust. Even so, over six years, the Street has developed an addiction to the idea of stimulus, though the positive effects are difficult to pinpoint.
Just as recently as last week we saw how just the suggestion of a possible extension of bond buying can juice the stock market.
Stocks were in free-fall in face a possible slump in Europe’s economies and its adverse impact on the U.S. economy, when St. Louis Fed President James Bullard hinted on the possibility the Fed would extend its bond buying.
The Market soared. How much of the market’s action can be attributed to Q3 earnings or Bullard’s comment is a matter of debate, but it illustrates how addicted the Street has become to the idea of Fed stimulus and assurance that interest rates will remain a historic lows.
TODAY:
If the Street can shake its addiction to Fed stimulus, the market can rise for “real” reasons.
If not, it will have to adjust downward to a level that it feels discounts the absence of stimulus.
If neither the economy or stock market can handle an eventual rise in interest rates from next to zero, crash of both becomes a possibility.
It’s a trade off. The value of low interest rates versus the economic benefits of millions of people getting more than a half-assed return on its savings.
If after a run up in stocks triggered in part by Bullard’s comment the stock market plunges when the Fed does not extend bond purchases Wednesday, then Bullard has done investors an injustice.
I think the Fed and others did a great job heading off a complete meltdown in 2008-2009, but it is time to stop micro-managing the stock and bond market.
Otherwise, the truth will out at some point in the future and it will get ugly.
The stock market is a great barometer, a great forecaster of present and future conditions turning up and down ahead of recessions, but outside interference with this mechanism by people in power positions can only lead to problems, big ones, i.e. “Hands off !”
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Investor’s first read– Daily edge before the open
DJIA: 16,805
S&P 500: 1,964
Nasdaq Comp.: 4,483
Russell 2000: 1,118
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FOMC MEETING Oct. 28 – 29: WILL FED EXTEND BOND PURCHASES ??
Last week , James Bullard, a non-voting Fed official, stepped in suggesting bond purchases could be extended which is huge, but only if it does so. When ? There is no press conference scheduled after its FOMC meeting next week, Oct. 28. * If they schedule one, odds strongly favor a special announcement indicating if it plans to extend bond purchases, which would be a tipoff. If the Fed is going to do this it will have to this month or in December, since there is no meeting scheduled for November.
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BULL MARKET RETRACEMENT:
A One-third retracement of the five and a half year bull market would take the DJIA down to 13,714 (S&P 500: 1,568) and it can get there in face of the right negatives. A one-third retracement of any major move is not out of the question., just not the norm.
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TECHNICAL ANALYSIS EACH of 30 DOW INDUSTRIALS (10/24 close)
By technically analyzing each of the 30 Dow industrials then using the Dow “divisor” to convert the data back into the DJIA, I can get a better read on what is primary support and a secondary support.
As of the 10/8 close: Resistance 17,298; Primary Support: 16,645; and Secondary Support: 16,542.
NOTE: These calculations generally hold for longer periods of time, but need to be changed when the market is hit with excessive volatility.
The resistance and support levels listed daily may differ, since they are shorter term.
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INTERNATIONAL TENSIONS:
Ukraine/Russia – quiet for now, but has the potential to get uglier.
ISIS/Iraq/Syria – A Euro/Mid-East coalition has formed to counter ISIL. A full-blown bombing mission has been undertaken, which stands to be ongoing. Psychologically, that stands to play well in America, which has been warned of future terrorist activity. The good possibility of a major war resulting must be considered.
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THIS WEEK’s ECONOMIC REPORTS:
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:
PMI Services –flash (9:45):
Pending Home Sales (10:00):
Dallas Fed Mfg. Ix. (10:30):
TUESDAY:
FOMC Meeting begins
ICSC Goldman Store Sales (7:45):
Durable Goods (8:30):
S&P Case Shiller Home Price (9:00):
Consumer Confidence (10:00):
Richmond Fed Mfg Ix. (10:00):
WEDNESDAY:
FOMC announcement (200): No press conference scheduled (yet)
THURSDAY:
GDP: Q2c – Final revision(8:30):
Jobless Claims (8:30):
FRIDAY:
Personal Income/Outlays (8:30):
Chicago PMI (9:45):
Consumer Sentiment (9:55):
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RECENT POSTS:
Oct. 16 DJIA 16,141 Rally Today Off Wednesday Lows Risky
Oct. 17 DJIA 16,117 What If the Fed Doesn’t Delay Taper ?
Oct. 20 DJIA 16,380 Critical Week for Bulls
Oct. 21 DJIA 16,399 Market Attacking Key Resistance
Oct. 22 DJIA 16,614 Just a Rally of End of the Correction ?
Oct. 23 DJIA 16,461 BIG Day for Economic Reports
Oct. 24 DJIA 16,677 DJIA – a Portfolio of Small Cap Stocks ?
George Brooks
A Game-On Analysis, LL
“Investor’s first read – a daily edge before the open”
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 decisions in keeping with their tolerance for risk.
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