Friday, September 19, 2014 8:40 a.m. 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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No, I do not see a Bull Market top, just an increasing risk of a sharp , perhaps severe, correction.
The feeding frenzy accompanying today’s record IPO of Chinese online retailer Alibaba (BABA) suggests a growing disregard for the potential for a correction. Obviously, this disconnect is traceable to the fact the stock market has not had a correction greater than 10% in three years – corrections have been followed quickly by recoveries.
I have no doubt, BABA will rise well beyond its IPO price of $68, as it draws buyers in who couldn’t get in on the IPO. It’s IPO market cap will be $170 billion. That compares with the present market cap of Amazon (AMZN) of $150 billion even though the latter’s sales are close to 9 times greater.
The U.S. economy is chugging along, the Street is not worried about interest rates now that Fed Chief Yellen has indicated a rise in its benchmark rate is not imminent. The Street is confident corporate earnings will continue to grow. War in the Mid-East is nothing new and the only game in town is common stocks.
In time, the frenzy over BABA will be exceeded by investors’ frenzy for issues far more speculative as the Bull Market hits its full stride, but for now BABA looks like a sign of too much greed and too little respect for reality.
TODAY:
I have expected a spike in stock prices for weeks, however until liftoff four days ago its chances seemed slim.
The Alibaba splash today can mark an excess typical of a market that needs a correction. It looks like the last thing the Street expects is a major correction, and that concerns me.
Good time to raise some cash to protect assets and provide a reserve to take advantage of lower prices in the event of a correction.
This is Quadruple Witching Friday when Index futures, index options, stock options and stock futures expire on the same day. Quad-witch occurs on the third Friday in March, June, September and December and can be disruptive to trading.
Investor’sfirst read– Daily edge before the open
DJIA: 17,265
S&P 500: 2,011
Nasdaq Comp.: 4,593
Russell 2000: 1,159
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THE FED: No more Yellen press conferences until Dec. 17
The Street wanted clarification on the Fed’s interpretation of interest rates remaining low for a “considerable time,” a term used since last March. They got it yesterday when Fed Chief Janet Yellen emphasized that rates are unlikely to rise quickly as the economy continues to improve, saying, “Even after employment and inflation are near mandate-consistent levels, economic conditions may for some time warrant keeping the target federal funds rate below levels the committee views as normal in the longer run.”
The Fed projects a rise in the Federal Funds rate to 1.375 by the end of 2015
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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 is forming to counter ISIL’s territory and influence quest.
This can get uglier than ugly where it is now. The possibility of a major war resulting must be considered.
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THIS WEEK’s ECONOMIC REPORTS:
The center of focus this week will be the FOMC meeting and Fed Chief Janet Yellen’s news conference at 2:30 p.m. Wednesday. 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. Svy (8:30): September index up to 27.14 from 14.69 in August. New orders 16.86 up from 14.40
Industrial Production (9:15): August was down 0.1 pct. after a gain in July of 0.4 pct..
TUESDAY:
FOMC meeting begins
ICSC Goldman Store Sales (7:45): Dropped 2.6 pct in the Sept. 13 week over the prior week. Year/year is +3.0 pct..
PPI-FD (8:30): Unchanged in July. Ex food/energy was up 0.1 pct. vs. increase of 0.2 pct. June.
WEDNESDAY:
MBA Purchase Mtge Purchase Apps: (7:00): Purchase apps rose 5.0 pct. in Sept. 12 week vs. drop of 3.0 pct. in the prior week. Refi’s rose 11.0 pct. after a drop of 11.0 pct. the prior week.
Consumer Price Ix.(8:30): Unchanged in August vs. a rise of 0.1 pct. in July
Housing Market Ix.(10:00): Sept. Index up to 59 from 55 in Aug..
FOMC announcement (2:00):
Fed press conference – Yellen (2:30):
THURSDAY:
Jobless Claims (8:30): Down 36,000 to 280,000 in the Sept. 13 week
Housing Starts (8:30): Down 14.4 pct. in Aug; Starts down 5.6 pct..
Philly Fed Svy (10:00) Aug. Index 22.5 vs 28.0 for July
FRIDAY:
Leading Indicators (10:00):
Quadruple Witching Friday
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RECENT POSTS:
Sept. 2 DJIA 17,098 What are Odds of a Big Correction of 8% – 12% ?
Sept. 3 DJIA 17,067 Breakout and Run – Followed by a Crunch
Sept. 4 DJIA 17,078 Bulls “Must” Take Charge NOW
Sept. 5 DJIA 17,069 Market to Tip Its Hand Today
Sept. 8 DJIA 17,173 Bullish Storm Surge Imminent ?
Sept. 9 DJIA 17,111 Bulls to be Tested Today
Sept. 10 DJIA 17,013 Stock Market Back on the “Edge”
Sept, 11 DJIA 17,068 Last Chance for Bulls to Avoid Crunch
Sept. 12 DJIA 17,049 The Fed, Elections, Geopolitics Stymie Bulls
Sept. 15 DJIA 16,987 A Brief Yellen Rally This Week ?
Sept. 16 DJIA 17,031 Street Keying on Yellen’s Wednesday Comments
Sept. 17 DJIA 17,131 Yellen Rally Risky – Raise Some Cash
Sept. 18 DJIA 17,156 Will BIG Money Sell Into Strength ?
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 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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