Monday, September 8 , 2014 9:08 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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SUMMARY:
This week will test the validity of Friday’s headline, “Market to Tip Its Hand Today.”
I explained that a break above DJIA 17,162 and 2012 on the S&P 500 would increase the odds of a sharp spike up in the market, resolving my Aug. 28 question whether 2,000 on the S&P 500 was a floor or a ceiling.
While the DJIA closed higher at 17,173, the S&P 500 fell a bit short at 2,007.
While the floor/ceiling issues is not yet resolved, my scan of the market action of each of the 30 Dow industrials after the close Friday reveals a sudden firming that could support a surge. In fact, 13 of the 30 had very strong chart patterns, only four were negative.
This strengthening was sudden, as if a spring was uncoiling. Kind of strange for big, lumbering, often dull stocks !
TODAY:
We had a strong one-day-reversal in the four major market averages Friday following seven days of indecision. If an upside breakout here is not powerful, it is suspect (a fake-out) leading to sharply lower prices.
This question should be resolved in the first 40 minutes of trading – odds favor the upside.
Support today is DJIA: 17,087; S&P 500: 2,001; Nasdaq Comp.: 4,571
Resistance today is DJIA: 17,159; S&P 500: 2,009; Nasdaq Comp.: 4,589
If a surge is imminent, those resistance levels won’t even slow the markets’ blast off.
As always when the market is news sensitive, geopolitical events would have an impact. With the international scene quiet, any change stands to be negative for stocks.
Investor’s first read– Daily edge before the open
DJIA: 17,173
S&P 500: 2,007
Nasdaq Comp.:4,582
Russell 2000: 1,170
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WHAT ARE THE ODDS OF A BIG CORRECTION OF 8% -12% ?
Friday’s market action increases the likelihood of another surge in stock prices, prior to any decline of significance.
While the rise in stock prices wasn’t great, the market action of the stocks I reviewed showed a distinct improvement.
I have expected a correction in September/October, one that could become significant if news deteriorates in the interim.
A major correction isn’t factored into many of the Street’s scenarios. After all the economy is gaining traction, and the Fed isn’t expected to raise interest rates until mid-2015.
Outlooks can change quickly, doubts and uncertainties can snowball. Careful !
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EUROPEAN CENTRAL BANK’S ECONOMIC STIMULUS
A surprise economic stimulus move by the European Central Bank (ECB) is driving the euro down sharply. The ECB cut its refinancing rate, reduced its deposit facility rate , lowered its lending facility, and initiated the purchase of euro-denominated covered bonds in an effort to jolt European economies out of lethargy. While the U.S. economy continues to inch forward, it could use help from abroad.
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INTERNATIONAL TENSIONS:
Ukraine/Russia – quiet for now, but has the potential to get uglier.
ISIS/Iraq/Syria – Euro/Mid-East coalition forming to counter ISIS’s territory and influence quest.
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TECHNICAL ANALYSIS OF EACH OF THE 30 DOW INDUSTRIALS (9/5) At key junctures, I technically analyze each of the 30 Dow industrials, then using the Dow’s “divisor” convert these results back into the DJIA. I seek a near-term resistance level and a primary and secondary support level.
As of Aug 29, the near-term resistance level is 17,318; the primary support is 16,990 and secondary support is 16,912.
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INTEREST RATES:On numerous occasions, I have reminded readers that stock prices can rise along with interest rates, but to a point where higher rates draw money away from stocks to bonds and where higher rates adversely impact the economy. Realistically, that point must be a lot higher than the zero-based interest rates existing today. I conceded that the stock market would take a brief hit when a move to higher rates was perceived by the Street, but stabilize before moving higher.
A recent study by Andrew Garthwaite, chief equity strategist for Credit Suisse concludes just that. Since 1977, he found the S&P 500 peaked no earlier than four months prior to the Fed’s first rate increase, but gained as much as 4 percent in the six months after the first increase. He notes, that while rate rises have increased volatility in the stock market, they did not mark the end of the bull market.
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THIS WEEK’s ECONOMIC REPORTS:
Very light week for 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 Business Optimism Ix. (7:30):
ICSC Goldman Chain Store Sales (7:45):
JOLTS – Job Openings/Labor Turnover (10:00):
WEDNESDAY:
MBA Mortgage Purchase Apps (7:00):
Wholesale Trade (10:00):
THURSDAY:
Jobless Claims (8:30):
FRIDAY:
Retail Sales (8:30):
Import/Export Prices (8:30):
Consumer Sentiment (9:55):
Business Inventories (10:00):
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RECENT POSTS:
Aug. 20 DJIA 16, 919 Is Market Now Vulnerable to Bad News ?
Aug. 21 DJIA 16,979 S&P 2000 to Trigger Selling
Aug 22 DJIA 17,039 Will Street Sell When S&P 500 Breaks 2,000 ?
Aug 25 DJIA 17,001 Stronger Economy – a Game Changer for Fed ?
Aug 26 DJIA 17,076 Bull/Bear Tug of War at S&P 2000 Level
Aug 27 DJIA 17,106 Market poised for Sharp Move
Aug 28 DJIA 17, 122 2,000 on S&P 500 – Floor or Ceiling ?
Aug 29 DJIA 17, 079 How Long Will Bulls Prop the Market ?
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
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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