European Monetary Ease June 5 - a Catalyst?

George Brooks |

SUMMARY:

      The stock market needs a catalyst and the 9-month to 18-month outlook  for the economy is it.  One other possibility is Europe where ECU President Mario Draghi says an easier monetary policy may be announced on June 5.

      An economic  contribution from Europe combined with a spring recovery in the U.S. would brighten the outlook for corporate earnings.

      A revision in Q1 GDP was announced today as a 1.0% decline rather than the prior estimate of  a  0.1% gain suggests a more harsh impact fromthe severe winter here and possibly a softening unrelated to the weather.

      The rebound in the economy currently underway now will have to gain more momentum or stock prices will go lower.

      So far, it looks like the economy is rebounding, but that rebound must gain more traction.

       If money managers see that happening, look for a surge in stock prices. We will need another month or two to get a full read.

.TODAY:

      Yesterday’s support levels of DJIA 16,619; S&P 500: 1,902; Nasdaq 4,216 held, but will be tested again today.  Failure to hold would result in a further drop today to  DJIA: 16,585; S&P 500: 1,988; Nasdaq Comp.: 4,198.

Investor’s first readDaily edge before the open

DJIA:  16,633

S&P 500: 1,909

Nasdaq  Comp.:4,225

Russell 2000:    1,136

Thursday,  May  29, 2014      8:55 a.m.

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NOTE:  I continue  to run “Sell in May” and “Housing” for two reasons. One, this  unds and analysis is relevant and I  add important content frequently. I get new readers, and I want them to have access to this insight.

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Sell in May and Go Away ?? stock market has ranged sideways

   A popular jingle this time of the year for newsletters and journalistsMay has offered a number of timely exits, but I don’t buy the  “stay away” part, clearly not until November.

    Based on the market’s strength since May 21, it looks like my contrariness is being rewarded.  The DJIA closed at 16,580 on April 30.

   Essentially, it is the backend of the “Best Six Months”* to own stocks (November 1 to May 1). Obviously, the message here is of thConsumer Confidence, the State Street                                                e two six month periods,  May to November is the worst for stocks. 

   This is true, but as I have noted with the Best Six Months, a lot can happen in the interim.

   This bromide can’t be taken as a “given.” Of the 26 years I studied a “top” occurred in May on 10 occasions ranging from May 1 to May22.  Two occurred in June and two in July.  No meaningful top occurred in 12 of the years studied.

   On far too many occasions over the last 26 years a May top was followed by a decline, but within months (well before Nov. 1) the market rallied sharply.  I see it more as a trading opportunity – i.e. “Sell in May,”  but be ready to buy back after a plunge.  

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HOUSING:

     The economy needs a contribution from the housing sector if it is going to gain major traction coming out of the winter slump.

      April’s 1.3% jump in Existing Home Sales may suggest a recovery in housing is near. The jump comes going up against a weak March, but total housing inventory rose 16.8% to 2.29 million homes for sale.  Bank lending will remain a problem.

      Even so, housing stocks got a big boost Friday and are beginning to show positive chart patterns. While Monday was quiet, housing stocks spiked at the open Wednesday on news D R Horton’s earnings more than doubled in Q2.

    PARTIAL LIST :

Beazer Homes(BZH)   $19.68

PulteCorp(PHM) :  $19.76

Toll Brothers (TOL):  $36.38

KB Homes(KBH): : $16.63

DR Horton(DHI) : $23.33

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THIS WEEK’s ECONOMIC REPORTS:

      This is a big week for economic news.  If it indicates the economy is charging out of its winter slump, money managers can expect to ramp up buying, assuming  the outlook for corporate earnings will improve. 

      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

Durable Goods (8:30): Increased 0.8 pct. in April vs. +3.6 pct (revised up from 2.6 pct. Projections were for drop of 0.8 pct.  Ex-transports gain was 0.1 pct.

FHFA House Price (9:00): A gain of 0.7 pct in Mar. vs. 0.6 pct. gain Feb.. Year/year for Mar. was +6.4 pct.

S&P Case Shiller  Home Prices (9:00): 20-city index more than projected at +1.2 pct. vs.0.8 pct.  Year/year was +12.4 pct.

NOTE: The major difference between FHFA and Case Shiller is  FHFA covers 13 more states and includes many more small towns as well as refi appraisals.

PMI Svcs flash (9:45): Jumped to 58.4 in May from 54.2 in Apr.

Consumer Confidence (10:00):Remained firm at 83.0 up from81.7 (revised)

Richmond Fed Mfg. Svy (10:00):  Flat in May at 7.

State Street Investors Confidence Ix.(10:00) Remains strong at 119.5  in May vs. 119.0 in Mar..

Dallas Fed Mfg. Svy(10:30): Increased  to 11.7 from 4.9

WEDNESDAY:

MBA Purchase Apps (7:00): Flat for the May 23 week, refi’s likewise

ICSC Goldman Store Sales(7:45): Down 1.2 pct. for the May 24 week (+2.1 pct. y/y)

THURSDAY:

GDP (8:30): Q1 revised down to minus 1.0 pct.

Jobless Claims (8:30):  Down 27,000 for May 30 week to 300,000

Corporate Profits (8:30):

Pending Home Sales (10:00):

FRIDAY:

Personal Income (8:30):

Chicago PMI (9:45):

Consumer Sentiment (9:55):

 

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RECENT POSTS:

May 13, DJIA  16,695  Bulls in Wings – Market Needs a Spark

May 14  DJIA  16, 715 What Could Spark a Surge or Plunge

May 15  DJIA  16,613  Market Needs Help from Economy, or…

May 16  DJIA  16,446  Bulls Blinked – But Don’t Get Too Bearish

May 19  DJIA   16,491  Stock Market Getting Ready for a Move ?

May 20  DJIA   16,511  Bull Still Alive

May 21  DJIA   16,374  Market Needs Help from Fed and Economy

May 22  DJIA   16,533 Again – Stock Market Set for a Big Move

May 27  DJIA   16,606 Market to Key on Week’s Economic Reports

May 28  DJIA   16,675 Stock Market Needs  a Catalystc

*Bloomberg

**Stock Trader’s Almanac

 

A Game-On Analysis, , LLC publication

George  Brooks

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

Brooks007read@aol.com

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 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.

 

 

 

 

 

 

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