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Big Test for the Bulls

SUMMARY:    Right now, this one is up in the air. The Street is becoming hardened to negative news. That, or it’s looking past the winter ravaged economy to a sharp


   Right now, this one is up in the air. The Street is becoming hardened to negative news. That, or it’s looking past the winter ravaged economy to a sharp rebound in consumer sentiments, and possibly a positive contribution to the global economy by Europe.
    As a negative, I don’t think the Russia/Ukraine crisis is over. It’s a question now of whether  it will seriously impact global economies and optimism going forward.
  The next FOMC meeting (first since January) will be held on March 18-19 when the Fed can weigh data on the economy to decide  whether to continue to taper out of QE.  Odds are, it will continue its monthly reduction.
   The Bulls will be tested this week, starting today with an attempt to correct downward.  Initial support is DJIA 16,368 (S&P 500: 1,867). A break below that has a chance of dropping further to DJIA 16,250 (S&P 500: 1,852).
   Resistance to the downside and a sharp one-day rally, would be very bullish.
Investor’s first read – a daily edge before the open
DJIA:  16,452
S&P 500:  1,878
Nasdaq  Comp.: 4,336
Russell 2000: 1.203
Monday, March 10, 2014, 2014   9:15 a.m.
   The DJIA took its hit last Monday with a 250-point intraday hit  before closing down 153 points for the day. Since then it has pressed upward, seemingly indifferent to whether  Crimea opts to become part of Russia in a referendum onMarch 16.
   Expect the “West” will make a lot of noise, threaten sanction, etc., but there is little it can do to prevent Russia from getting its way, unless forces within Russia reacting to a flight of capital, plunge in Russian stocks and the Ruble, rising interest rates put a leash on Mr. Putin’s power grab.  
   Where this gets really dangerous is if it is perceived  Russia will become a threat to the Baltic states where one-quarter of the citizens of Latvia and Estonia see themselves as Russian.
   Don’t take this one too lightly, its potential for disruption in our markets may escalate.
  Last week New York Fed president Bill Dudley said he believes severe winter weather  has shaved a full percentage point off the nation’s GDP in Q1, Beyond that, Dudley is optimistic since there will be less drag from federal spending cuts, improved household finances, and corporations that are awash in cash.
   Undoubtedly, a break in the winter weather will boost consumer optimism resulting in a surge of retail spending and firm stock prices.
   This transition is critical.  If  severe winter weather  scrunched economic activity, we should see a sharp rebound once warmer weather sets in.  If not, we have a problem.
   Manufacturing output , new orders and exports are  up for the eighth consecutive month, suggesting its recovery is real, though not yet robust. Our economy has scratched and clawed its way out of  a horrendous recession without help from Europe. Obviously, a recovery there stands to  accelerate our recovery here.
A  BEST SIX MONTHS to own stocks – No more corrections ???
   Over the years, the Stock Trader’s Almanac* has expounded on its significant finding that the stock market performs better between November 1 and May 1 than between May 1 and November 1.
   The Almanac’s  “Best Six” goes back to 1950..  The six months is a snapshot between November and May.  Many major market advances often start before November, but the point made  here is the period between fall and May is where the action is.
  The six months between November 1 and May 1, have consistently outperformed the six months between May 1 and November 1
   Is this going to be another “BEST six months to own stocks ? .   So far, the DJIA is ahead  5.4% since October 31, 2013 even with a 7% correction in the interim. 
   Over of the last 25 years, Nov.1 to May 1, have produced 19 up-years, 3 flats and 3 downers. The “Best Six” years averaged gains of 11.8% with the best year up 25.6% (1998 – 1999). 
   Over the last 25 years, there have been 14 corrections ranging between 6% and  16% during this November1  to May1 period.
  We have had one correction so far since October 31, another correction is possible, but unlikely.
The economic calendar  is light this week.
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.”
No major economic reports
NFIB Small Business Optimum Ix (7:30 a.m.):
ICSC Goldman Store Sales (7:45 a.m.):
JOLTS (Job Openings/Labor Turnover 10:00):
Wholesale Trade (10:00):
WEDNESDAY:MBA Purchase Apps (7:00 a.m.):
Treasury Budget (2:00 p.m.)
Jobless Claims (8:30):
Retail Sales (8:30):
Import/Export Prices (8:30):
Bloomberg Consumer Comfort Ix. (9:45)
Business Inventories (10:00):
PPI-FD (8:30):
Consumer Sentiment (9:55):
Feb 20  DJIA 16,040 Winter Slump – Spring Rebound ?
Feb 21  DJIA 16,133 Housing Hanging Tough – a Harbinger ?
Feb 24  DJIA 16,103 Bull Market – the Pressure to Act
Feb 25  DJIA 16,207 Rally Failure – or Start of Another Up Leg ?
Feb 26  DJIA 16,179 Monday’s Market Action – a Signal ?
Feb 27  DJIA 16,198 Market Setting Stage for an Early Spring Rally
Feb 28  DJIA 16,272 March Setting Stage for Spring Rally.
Mar 3   DJIA  16,321 Russian Bear Providing American Bull an Opportunity
Mar 4   DJIA 16,168  Crisis Almost Over – Easy Does it on Opening Prices
Mar 5   DJIA 16, 395 Street Reaching for Risk – Sneaky Strong
Mar 6   DJIA 16, 360 Selective – Stock Pickers’ Market
  George  Brooks
“Investor’s first read – an edge before the open”
*Stock Trader’s Almanac
The writer of  Investor’s first read, George Brooks,  is not 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. Brooks may buy or sell stocks referred to herein.
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