Monday, October 20, 2014 8:59 a.m. DAILY, 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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ALERT: IBMwas down $12.45 in pre-market trading after cutting its earnings outlook. That will drop the DJIA by close to 80 points at the open. A price-weighted average, the DJIA is subject to such distortions.
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Last Wednesday’s “Risk: DJIA 14,666…by Oct. 3,:” noted that the drop could be headed off by strong Q3 earnings plus impressive projections for future quarters, as well as a Fed extension of bond purchases.
Shortly after a weak open Thursday, the Fed’s James Bullard suggested just that, a delay in taper, triggering a surge in the stock market.
But, what if the Fed doesn’t extend bond purchases next week ?
That could trigger another sell off.
It’s too early in the reporting period to draw any conclusions on Q3 earnings.
So far, 82 companies have reported with 68% beating earnings estimates, 65% beating revenues, a little below the norm.
This week 130 companies will report. Factset.com notes the Street is projecting higher earnings growth in Q4 and the first half of 2015. Based on last Thursday’s close of 1,862, Factset projects S&P 500 forward earnings of $129.31, or 14.4 times earnings, slightly above 5 and 10-year averages.
TODAY:
Last week , James Bullard, a non-voting Fed official, stepped in suggesting bond purchases could be extended which is huge, but only if it does so. When ? There is no press conference scheduled after its FOMC meeting next week, Oct. 28. * If they schedule one, odds strongly favor a special announcement indicating it will extend bond purchases, which would be a tipoff. If the Fed is going to do this it will have to this month or in December, since there is no meeting scheduled for November.
The negatives overhanging this market are known ( Europe, Russia, ISIS, Ebola). Presently, it looks like the major swing factor is the Fed and Q3 earnings plus future expectations.
If there is further risk in the market after the recent 9.9% S&P 500 correction, it will be if the BIG money sells into any good news on these two issues.
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Investor’s first read– Daily edge before the open
DJIA: 16,117
S&P 500: 1,862
Nasdaq Comp.: 4,217
Russell 2000: 1,086
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BULL MARKET RETRACEMENT:
A One-third retracement of the five and a half year bull market would take the DJIA down to 13,714 (S&P 500: 1,568) and it can get there in face of the right negatives. A one-third retracement of any major move is not out of the question., just not the norm.
Good Q3 earnings and projections for Q4 and 2015 could prevent the plunge I see shaping up. Certain comments by Fed officials about interest rates staying low into late 2015 could delay a crunch, but only temporarily.
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TECHNICAL ANALYSIS EACH of 30 DOW INDUSTRIALS (10/17 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 16,735; Primary Support: 15,894; and Secondary Support: 15,290.
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 good possibility of a major war resulting must be considered.
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THIS WEEK’s 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.”
MONDAY:
Fed officials speak; Powell (10:00/Tarullo 12:00
TUESDAY:
ICSC Goldman Store Sales (7:45):
Existing Home Sales (10:00):
WEDNESDAY:
MBA Purchase Apps/Refis (7:00)
Consumer Price Ix (8:30):
THURSDAY:
Jobless Claims: 8:30):
Chicago Fed Nat’l Activity Ix (8:30):
FHFA House Prices (9:00):
PMI Mfg Ix. (9:45):
Leading Economic Inds. (10:00):
Kansas City Fed Mfg Ix. (11:00):
FRIDAY:
New Home Sales (10:00):
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RECENT POSTS:
Sept. 30 DJIA 17,071 Big Move in Market for Winner of Tug of War
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
Oct. 7 DJIA 16,991 Volatility: Q3 earnings, ISIS, the Fed, Elections
Oct. 8 DJIA 16,719 Extreme Volatility = Risk, but Opportunity
Oct. 9 DJIA 16,994 Bad News is Good News ? Pure Insanity !
Oct. 10 DJIA 16,544 Last Man Standing – Bear – or Bull ?
Oct. 13 DJIA 16,544 A Dangerous Rally – Dow 16,000 this Week ?
Oct. 14 DJIA 16,321 Technical Bounce – Easy Does It !
Oct. 15 DJIA 16,315 Risk: DJIA 14,666 (-1,655 pts.) by Oct 31
*Note: Correction: There is a FOMC meeting next week (Oct. 28-29, there just isn’t a press conference “scheduled” to accompany it (yet).
George Brooks
A Game-On Analysis, LL
“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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