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DJIA – A Portfolio of Small-Cap Stocks?

Friday, October  24, 2014 9:03 a.m.  DAILY BEFORE the OPEN

Friday, October  24, 2014 9:03 a.m.  DAILY BEFORE the OPEN


Daily:Boiling down fundamental, technical, economic,

monetary, fiscal, psychological, and seasonal data into a quick read.



    It clearly acts like it with sharp moves either way in big cap stocks, mostly in reaction to Q3 earnings reports.

    It all started with  Fed’s James Bullard’s hint that the Fed could extend bond purchases beyond this month’s deadline.

     The timing of  Bullard’s comment in the morning, Thursday, Oct. 16, was  perfect, the market  and oil prices were in a tailspin.  Addicted to a comfort level provided by Fed bond purchases,  the Street responded as expected – it raced to buy.

    The big question now is, What will the Street do if the Fed completes taper next Wednesday ?

Such an important decision would have to be accompanied by  a press conference, but none is scheduled to-date. If one is announced, the Street will know what is coming.

     If this rally is more a response to Q3 earnings than Bullard’s comment, it is sustainable.     

     I just technically analyzed 30 Dow stocks and 34 leading Nasdaq stocks, and see “panic,” as buyers (long and shorts) scramble to buy – at the market !

    A certain urgency to buy is evident as if the Street fears missing its last chance to buy.

    Technically, Netflix (NFLX: $383) looks like it’s going to $406, Tesla (TSLA: $235) to $252, Google (GOOG: $544) to $560, and Facebook (FB: $80) to $86 – immediately !

     Maybe they will, but I am not buying.  At extremes, investors surrender to the market’s direction (up or down), feeling, “I can’t stand it anymore,” and recklessly buy or sell.

     With the market surging, it looks like the Street is frantically chasing stocks – not a sound tactic.


   Four of the 30 Dow industrials accounted for 112 of the 216 points gained by the DJIA yesterday (CAT, V, GS, MMM).

    I am hoping the reason for the market’s strength is earnings-based and not a hope the Fed will announce it  is extending bond purchases next Wednesday. If  the latter is the driver of stock prices, and the Fed doesn’t extend bond purchases, stocks will take a hit.

    The major market averages have recouped about two-thirds of the loss their nasty September/October loss (S&P 500: – 9.9%, the DJIA and Nasdaq: -8.6%), which is about the level where they encounter some resistance.

   Look for a mixed open

   Minor support today is DJIA: 16,598; S&P 500: 1,941: Nasdaq Comp.:4,427.


Investor’s first readDaily edge before the open

DJIA: 16,677

S&P 500:  1,950                               

Nasdaq  Comp.: 4,452

Russell 2000: 1,116



    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 if it plans to 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.



    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.



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 16,954; Primary Support: 16,490; and Secondary Support: 16,954.

   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.



   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.



     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.”



ICSC Goldman Store Sales (7:45): Down 0.3 pct. in 10.18 week; Year/year is +2.1 pct.

Existing Home Sales (10:00): Up 2.4 pct. to an annual rate of 517 million units; Year/year is down 1.7 pct.


MBA Purchase Apps/Refis (7:00) Apps up 11.6 pct. vs gain of 5.6 pct  week ago

Consumer Price Ix (8:30):Up 0.1 pct; Ex food/energy up 0.1 pct.


Jobless Claims: 8:30): Up 17,000 to 283,000 in 10/17  week

Chicago Fed Nat’l Activity Ix (8:30): Sept. index up  to plus 0.47 from minus 0.25 in Aug.

FHFA House Prices (9:00): Up 0.5 pct. in Aug. from 0.2 pct. in July.  Year/year is 4.8 pct.

PMI Mfg Ix. (9:45): Index down to 56.2 in Oct. from 57.5 in Sept.

Leading Economic Inds. (10:00): Up 0.8 pct in Sept vs unchanged in Aug.

Kansas City Fed Mfg Ix. (11:00): Oct.  index slipped to 4 from 6 in Sept.


New Home Sales (10:00):



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

Oct. 16   DJIA  16,141  Rally Today Off Wednesday Lows Risky

Oct. 17   DJIA  16,117  What If the Fed Doesn’t Delay Taper ?

Oct. 20   DJIA  16,380   Critical Week for Bulls

Oct. 21   DJIA  16,399   Market Attacking Key Resistance

Oct. 22   DJIA   16,614  Just a Rally of End of the  Correction ?

Oct. 23   DJIA   16,461  BIG Day for Economic Reports

*Note: Correction: There “is” an FOMC meeting next week Oct. 28-29, there just isn’t a  press conference “scheduled” to accompany it (yet).

** Stock Trader’s Almanac

George  Brooks

A Game-On Analysis,  LL

“Investor’s first read – a daily edge before the open”

[email protected]

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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