Thursday, August 14 , 2014 8:00a.m. BEFORE the OPEN
SUMMARY:
There are negatives that can rain on the bull’s parade, most of them obvious, such as the Ukraine, Iraq, Europe’s economy, and a rise in interest rates at some point.
I am concerned about a resurgence of the Street’s creation of a whole new array of derivatives, similar to the kind that magnified the carnage reaped by the 2007 – 2009 bear market. Leverage is deadly.
Without formidable negatives, this bull should run much higher, but not in a straight line. I still expect a correction into October. The rally we are seeing now will tell us a lot about the timing of that. Failure to generate a big following now would signal the beginning of such a correction.
The release of Q2 earnings has run its course (fortunately), and the Street is now mapping out the prospects for earnings going forward. That, more than the “news” factor will drive the stock market.
TODAY:
Support todayis DJIA: 16,560; S&P 500: 1,935; Nasdaq Comp.:4,410
Resistance todayis DJIA:16,770; S&P 500: 1,961; Nasdaq Comp.: 4,467
I set resistance a bit higher today, since the market has room to run, and assuming bad news doesn’t intervene to cut its run short.
Investor’s first read– Daily edge before the open
DJIA: 16,651 RELEASED EARLY TODAY
S&P 500: 1,946
Nasdaq Comp.:4,434
Russell 2000: 1,141
BETTER OFF NOW ?
How much better off are we now than at the stock market top in 2007 prior to the worst recession since the 1930s and coming within a hair of a global meltdown ?
So far, the current bull market is up DJIA: 159% ; S&P 500: 192%; Nasdaq Comp.: 251%; Russell 2000: 234%.
The preceding bull market (2002 – 2009) was up DJIA: 99%; S&P 500: 105%; Nasdaq Comp.158%; Russell 2000: 164%
The current bull market has now exceeded the 2002 – 2007 bull market top by DJIA: 17%; S&P 500: 24%; Nasdaq Comp. 55%; Russell 2000: 33%.
While it took only 18 months for the market to plunge 55% between October 2007 and early March 2009, it took four years for it to recoup those losses.
I am curious how many of those investors “in it for the long haul” in October 2007 actually rode it out until their portfolios returned to the black. Or, out of panic, did they sell near the bottom ? Timing is important.
Assuming we are not looking at a repeat of the 2007 – 2009 debacle, the current bull market is reasonably priced, not cheap intermediate-term, but reasonably priced.
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IS the ECONOMIC RECOVERY FAILING TO GAIN TRACTION ?
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.
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TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS
(UPDATED ANALYSIS: AUGUST 8
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
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THIS WEEK’s ECONOMIC REPORTS:
Not too much happening this week with 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.”
TUESDAY:
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.
WEDNESDAY:
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.
THURSDAY:
Jobless Claims (8:30):
Impost Export Prices (8:30):
FRIDAY:
PPI-FD (8:30):
Empire State Mfg Ix. (8:30):
Industrial Prod. (9:15):
Consumer Sentiment (9:55):
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RECENT POSTS:
July 29 DJIA 16,982 Quite Before the Storm ?
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 !
*www.agaryshilling.com
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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