Thursday, October 9, 2014 8:50 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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Is the Fed blowing air into an already inflated balloon ?
Yesterday’s 274-point surge in the DJIA was attributed to the FOMC minutes which expressed concern for growth in the U.S. economy stating it, “might be slower than they expected if foreign economic growth came in weaker than anticipated,” adding it planned to keep interest rates near zero for a “considerable time.”
With bond purchases ending this month, the Fed had no alternative but to ensure the business community a rise in interest rates was not as early as Q1 as feared.
Let me get this straight – the Street believes Low interest rates are more bullish than an expanding economy. WOW !
If our economy cannot stand on its own without a zero interest rate policy, it is in huge trouble.
And what happens when the Fed even hints that interest rates are going to rise from zero to zero plus a smidge even if the economy is beginning to sizzle ?
Time for the Street to get off the Fed teet. Bad wasn’t so good in 2008, 1990, 1980-81, 1973-74, 1969-70. The Street didn’t welcome bad then. Bear markets accompanied recessions in those years ranging from -58% (2007-09) to -14.7% (1983-84).
Q3 earningsare expected to increase 4.9% for the quarter, but that estimate is down from 7.8% in July according to a Bloomberg study.
TODAY:
I welcome the rally, however it should be based on sound thinking. The Street can only buy bad news for so long. If bad news suddenly becomes a reality and stocks have been run up, investors are going to get hammered.
So, what happens when interest rates notch up a smidge in face of a strengthening economy ? Does the Street bail out ? Even if the economy is gaining traction with corporate earnings beginning to surge ?
This is still a dangerous market short-term. Yesterday’s knee-jerk reaction to the release of the minutes from the FOMC meeting was NOT based on sound thinking. If the Fed is wary of a slowing of an economy that is only growing modestly, the Street should be concerned, as well.
Now that interest rates are off the table as a prime concern, Q3 earnings will become the Street’s prime focus. Alcoa’s (AA) upbeat report yesterday got the season off to a good start. Q3 earnings for the S&P 500 are expected to rise close to 5%, but that has been revised down from 7.9% in July.
There should be some support today at DJIA: 16,892, S&P 500: 1,955, Nasdaq Comp.:4,432. Support/resistance levels are suspect when extreme news-driven volatility dominates trading.
There is room for more upside after yesterday’s run.
This is still a tug of war between Bulls and Bears with first one looking like a winner, than the other. That can be a cruel whipsaw for investors trying to time buys and sells. This should be resolved in October.
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Investor’s first read– Daily edge before the open
DJIA: 16,994
S&P 500: 1,969
Nasdaq Comp.:4,468
Russell 2000: 1,097
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TECHNICAL ANALYSIS EACH of 30 DOW INDUSTRIALS (10/7 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 17,211; Primary Support: 16,820; and Secondary Support: 16,211.
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 possibility of a major war resulting must be considered.
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THIS WEEK’s ECONOMIC REPORTS:
Light week for reports on the economy. FOMC meeting, minutes released Wednesday, but no press conference 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): Up 0.1 pct. in Oct. 4 week vs. drop if 0.2 pct. in the prior week. Yest/year is +3.9 pct.
JOLTS (10;00): There were 4.835 million jobs open Aug. 31 vs. 4,605 million in Jly.
FOMC Meeting begins
WEDNESDAY:
MBA Purchase Apps/ Refi’s (7:00): Purchases up 2.0 pct.; Year/year down 8.0 pct. Refi’s up 5.0 pct.
FOMC Minutes (2:00): No Press Conference
THURSDAY:
Jobless Claims (8:30): Down 1,000 to 287,750 in Oct. 4 week.
Wholesale Trade (10:00):
FRIDAY:
Import Export Prices (8;30):
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RECENT POSTS:
Sept, 24 DJIA 17,055 Critical Crossroads for Money Managers
Sept. 25 DJIA 17,210 Back to Tug of War – Bulls vs. Bears
Sept 26 DJIA 16,945 Moment of Truth for Market’s Direction
Sept. 29 DJIA 17,113 Huge Test for Bulls Today
Sept. 30 DJIA 17,071 Big Move in Market for Winner of Tug of W ar
Oct. 1 DJIA 17,042 October – Risk or Opportunity ?
Oct. 2 DJIA 16,804 October Opportunity But Angst in Interim
Oct. 3 DJIA 16,801 Rally Today Must Hold
Oct. 6 DJIA 17,009 Best Six Months for Owning Stocks Looms
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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