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Another News Whipsaw – Where To Now?

Friday,  August  15 , 2014     11:45 a.m.   SUMMARY: Delayed today due to computer problems    A continuation of  the market’s

FridayAugust  15 , 2014     11:45 a.m.  

SUMMARY: Delayed today due to computer problems

   A continuation of  the market’s three-day advance was stopped in its tracks this morning by reports of  an escalation of military conflict in the Ukraine.

   This highlights the dangers of a news whipsaw market where a single piece of news can reverse the direction of the market. 

    If the report is true, the market will continue down. If it is reported that the news of an escalation is unfounded, the market will rebound.

    There is little an investor can do, except maintain a cash reserve and be careful not to chase a stock that has moved up sharply.

    It appears that the Street believes the U.S. economy can survive even if Europe’s economies are adversely affected by the  sanctions on Russia.

    But, we have to assume this will be a news sensitive market, ergo subject to an abrupt reversal at any time.

    Obviously, the real issue is the economy’s ability to gain increased traction going forward and subsequently the ability of U.S. corporations to  expand results at the top line, as well as bottom line where “financial engineering”  has contributed significantly to results.

     But, for the time being, the “news” factor will rule.


    Today’s downside depends on Russia’s reaction to Ukraine’s destruction of Russian  equipment that reportedly crossed the border today, but  uncertainty leading into the weekend will magnify concerns and adversely impact prices more so than if this happened during the week.

    Near term, there is some support at DJIA 16,520; S&P 500: 1,934; Nasdaq Comp. 4,404.


Investor’s first readDaily edge before the open

DJIA: 16,713

S&P 500: 1,955

Nasdaq  Comp.:4,453

Russell 2000:    1,143



    The DJIA has advanced 160% (the S&P 500: 194%) through August 14.

    But the base point for calculating that advance was March 2009 from DJIA 14,279 (S&P 500: 666) and came after an unprecedented bombardment of  unthinkable events, including failures and bailouts of  the Street’s most prestigious names: AIG, Lehman Bros., Merrill, Wachovia, Washington Mutual, F.Mae and F. Mac, etc. and a global scramble for survival. A total meltdown appeared imminent between September 2008 and March 2009, panicking investors and  crushing stock prices beyond reason.

    The final bear market plunge from DJIA 9,000 (S&P 500: 970)  to DJIA 6,440 (S&P 500: 666),  a drop of  28.4% and 31.3% respectively, was driven by pure hysteria.

    While I am stretching the rules of technical analysis a bit here, there is merit in the concept that  the final plunge was so emotionally charged, a more reasonable base for the bear market bottom would be DJIA 9,000 (S&P 500: 970) where the market began to fall apart in October 2008.

    Based on that assumption, the DJIA would have advanced 85% (S&P 500: 101%) through August 14, 2014, not 160% and 194% respectively. Put another way, that whole panic zone serves as the base for a bear market bottom, not the actual lows, owing to the extreme nature of events that produced the crunch.

    Conclusion: While not cheap, stocks are not as over priced as the doomsters think.



Depends on who you ask. A.Gary Shilling, publisher of  “INSIGHT” * challenged government press releases in an August 4, Special Report, “After the Government Report Releases.”

    Among the first to warn readers in advance of the Great Recession, Shilling  was quick to point out that the July 30, Q2 GDP report of an annualized gain of 4.0% was misleading with 1.66 percentage points attributed to a change in inventories, bringing the  growth number down to 2.3%, a rate he feels is not great enough to “spawn meaningful growth in wages and labor income.”  Excess inventories that are not worked off by sales  penalize future production.

    He attributes last week’s plunge in the stock market to the Street’s concern that the economy is not rebounding.

    If he is right, the question arises, Will the Fed have to revise its taper schedule ?

THE FED:                               

    We will hear more cautionary  comments from the Fed going forward in an attempt to ease an interest rate hike when its reality hits early next year. The Fed does not want speculative fever to run rampant prior to the rate increase.

     The Fed’s “easing in” policy is bad news for those who want the feeding frenzy to continue unabated, but good news for investors who opt for  a more stable market and an inevitable crunch instead of crash.





    At key junctures, I technically analyze each of the 30 Dow industrials seeking a reasonable near-term support and a more extreme support leyel, as well as a short-term resistance level. By technically studying the balances of buying and selling in each stock, then converting that data back to the DJIA using the “divisor” (0.1557159) I can get a better reading on the average itself.  The DJIA is a price-weighted average and subject to distortion by higher priced issues.

     After yesterday’s crunch, Iran my analysis based on the July 31 closeand concluded the near-term upside for the DJIA HAS DROPPED TO  16,765, a  reasonable downside from here is 16,391 and more extended downside risk to 16,264.

    Note: My daily support/resistance  levels are more short-term oriented



     Not too much happening this week with economic reports.

      For detailed analysis of both the U.S. and Foreign economies along with charts, go 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.”


NFIB Small Business Optimism Ix. (7:30): Index improved to 95.7 in June from 95.0 in May

ICSC Goldman Store Sales (7:45): Dropped 1.4 pct.  in Aug 9 week: Year/year +3.2 pct. vs. +4.1 pct week prior.

JOLTS – Job Openings Labor Turnover (10:00): There were 4.671 million job openings  in last week of June vs. 4.577 million in May. Both the hires rate (3.5%) and separations rate (3.3%) were essentially unchanged.


MBA Purchase Apps (7:00): Down 1.0 pct. in Aug. 8 week, same as week before Year/year down 10 pct.. Refi’s down 4.0 pct.

Retail Sales (8:30): Flat in July after a 0.2 pct. gain in June

Business Inventories (10:00): Business inventories rose 0.4 pct. in June; sales rose 0.3 pct, but stock-to-sales ratio remained unchanged at 1.25. Retail inventories rose 0.5 pct. but sales trailed with a gain of only 0.2 pct., bumping the stock-to-sales ratio up one point to 1.42.


Jobless Claims (8:30): increased 21,000 in the Aug. 9 week to 311,000

Impost Export Prices (8:30): Import prices fell 0.2 pct. in July


PPI-FD (8:30): Slowed to a plus 0.1 pct. in July from a jump of 0.4 pct in June.

Empire State Mfg Ix. (8:30): Index dropped to 14.69 in Aug. from 25.6 in July. New Orders were 14.14 vs. 18.77 in July

Industrial Prod. (9:15):July was up 0.4 pct. vs a gain of 0.4 pct. in June

Consumer Sentiment (9:55): Index dropped sharply in Aug to 79.2 from 81.8 in July



July 30   DJIA   16,912  Market on the Verge of Big Move ?

July 31   DJIA   16,880  Huge Test for Bulls

Aug.  1   DJIA  16,563  False Alarm, or ………

Aug.  4   DJIA   16,493  Trader’s Buy, but Risks are High.

Aug.  5   DJIA   16,569  Bulls “Must”  Step In Now, or…….

Aug.  6   DJIA   16,429  Is The Economy Really Rebounding ?

Aug.  7   DJIA   16,443  Rally to Give Investors a Good Read on Near-Term

Aug.  8   DJIA   16, 368 News Whipsaw = Increased Volatility

Aug. 11  DJIA   16, 553 Rebound to Good News – How Far ?

Aug. 12  DJIA   16,569  News Whipsaw – Watch Your Back !

Aug. 13  DJIA   16,560  Rally ?  Be Very Careful !

Aug. 14  DJIA   16,651  Better Off Now than in October 2007 ?


A Game-On Analysis,  LLC publication

George  Brooks

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

[email protected]

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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