SUMMARY:
Yes, this is a nervous market, but the angst is shared by both buyers and sellers.
Sellers fear a plunge in stock prices, worried that the rebound out of the Winter deep freeze won’t develop and tormented by pundits who claim the market is over-priced.
Buyers are driven by the necessity to put money to work since there appears to be nowhere else to invest it, as well as a fear of missing another up-surge in prices.
Yesterday’s big jump was attributed to the FOMC report that didn’t see inflation on the horizon any time soon and by a better-than-expected manufacturing report out of China.
OK, good news out of China is a positive, but when has anyone worried about inflation?
The DJIA was down 137 points Tuesday but up 158 points Wednesday without the kind of news that reverses a sharp drop in prices.
The Street is in a quandary. It doesn’t want to miss a big move up, yet doesn’t want to get skewered by a big plunge down.
The key to “up” or “down” is the economy. A mediocre rebound from the winter slump doesn’t cut it. A robust recovery is healthy for all concerned, consumers and corporations.
We should be getting answers in coming weeks, perhaps as early as today.
TODAY:
Resistance today is: DJIA: 16,603; S&P 500:1,895; Nasdaq: 4,147
A break below DJIA 16,498 calls for a drop to 16,447.
A break below S&P 500: 1,880 calls for a drop to 1,876
A break below Nasdaq Comp. 4,110 calls for a drop to 4,096
I have a high regard for Robert Doll, head of money management at Nuveen Asset Management. His comments on Bloomberg Radio last week made a lot of sense. He said, “This is the least believed bull markets that I’ve ever seen. From here it’s earnings, it’s fundamentals, it’s 'can the economy grow?' My guess the answer to that question is yes.”
Investor’s first read– Daily edge before the open
DJIA: 16,533
S&P 500: 1,888
Nasdaq Comp.: 4,131
Russell 2000: 1,103
Thursday, May 22, 2014 8:45 a.m. NOTE: My next “first read” will be posted tonight without benefit of morning news, or not until Tuesday.
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NOTE: I continue to run “Sell in May” and “Housing” for two reasons. One, this analysis is relevant and I add important content frequently. Two, I get new readers and I want them to have access to this insight.
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Sell in May and Go Away??
A popular jingle this time of the year for newsletters and journalists.
May has offered a number of timely exits, but I don’t buy the “stay away” part, clearly not until November.
Essentially, it is the backend of the “Best Six Months”* to own stocks (November 1 to May 1). Obviously, the message here is of the two six month periods, May to November is the worst for stocks.
This is true, but as I have noted with the Best Six Months, a lot can happen in the interim.
This bromide can’t be taken as a “given.” Of the 26 years I studied a “top” occurred in May on 10 occasions ranging from May 1 to May 22. Two occurred in June and two in July. No meaningful top occurred in 12 of the years studied.
On far too many occasions over the last 26 years a May top was followed by a decline, but within months (well before Nov. 1) the market rallied sharply. I see it more as a trading opportunity – i.e. “Sell in May,” but be ready to buy back after a plunge.
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HOUSING:
We cannot have a robust economic recovery from the severe winter months without a rebound in housing. Such a rebound would likely be preceded by an up-move in housing industry stocks.
So far the numbers are not encouraging, but a sharp drop in long-term interest rates could pull mortgage rates down triggering increased housing activity.
Some 31% of adults aged 18 to 34 live at home, which indicates a huge market is there for prospective home buyers.
The problem is, banks aren’t lending. While rates are attractive to home buyers, they are too low for a bank to be interested in lending. For a clear explanation, google a January 15 opinion piece by Felix Salmon.
WEDNESDAY: The housing stocks below were mostly stable without any indication of significant buying than would signal an imminent recovery in housing.
PARTIAL LIST :
Beazer Homes (BZH) $18.18
PulteCorp ($PHM) : $18.81
Toll Brothers (TOL) : $34.26
KB Homes (KBH) : : $15.91
DR Horton (DHI) : $22.12
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THIS WEEK’s ECONOMIC REPORTS:
Aside from a lot of speeches by Federal Reserve officials, this will be a light reporting week. Thursday brings Existing Home Sales and Friday New Home Sales.
For detailed analysis of both the U.S. and Foreign economies along with charts, go to www.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.”
TUESDAY:
ICSC Goldman Store Sales (7:45): Down 1.3 pct. for May 17 week – possible distortion due to Easter and (yes) weather –rain.
Fed’s Plosser speaks (12:30)
WEDNESDAY:
MBA Purchase Apps.(7:30) Down 3.0 pct. week May 16. Year/year down 12.0 pct., Refi’s up 4.0 pct.
Fed’ Dudley speaks (10:00)
Fed’s Yellen speaks (11:30)
Fed’s George speaks (12:50)
Fed’s Kocherlakota speaks (1:30)
FOMC Minutes released (2:00)
THURSDAY:
Jobless Claims (8:30): Up 28,000 to 326,000 for May 16 week.
PMI Mfg. Ix. Flash (9:45):
Existing Home Sales (10:00):
Leading Indicators (10:00):
Kansas City Mfg. Ix. (11:00)
FRIDAY:
New Home Sales (10:00):
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RECENT POSTS:
Apr 30, DJIA 16,535 Sell in May and Go Away ??
May 1 DJIA 16,580 Money Manager Dilemma – Plunge Now
May 2 DJIA 16,558 Big Move in the Offing ?
May 5 DJIA 16,512 Bear Calling Bulls Out
May 6 DJIA 16,530 Wild Ride to Continue
May 7 DJIA 16,401 Tech Headed For Slaughterhouse – Huge Selling Climax
Buy Looms
May 8 DJIA 16,518 Major, Major Bull/Bear Crossroads
May 9 DJIA 16,550 Head & Shoulders Top Nasdaq ?? Careful !
May 12 DJIA 16,583 Market Really Wants to Run, but…..
May 13, DJIA 16,695 Bulls in Wings – Market Needs a Spark
May 14 DJIA 16, 715 What Could Spark a Surge or Plunge
May 15 DJIA 16,446 Market Needs Help from Economy, or…
May 16 DJIA 16,491 Bulls Blinked – But Don’t Get Too Bearish
May 19 DJIA 16,511 Stock Market Getting Ready for a Move ?
*Bloomberg
**Stock Trader’s Almanac
A Game-On Analysis, , LLC publication
George Brooks
“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 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.
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