Wednesday, October 8, 2014 9: 16 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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Yesterday, I indicated that a serious warning signal would be flashed if the market declined below DJIA: 16,795; S&P 500: 1,947; Nasdaq Comp.: 4,404.
A warning signal has been flashed, the message being odds of more downside are vastly increased.
While October’s rep is for pain, it has proved to be a month of opportunity spawning bull markets in 1974, 1987, 1990, 1998, and 2002, not to mention many hefty market rallies within bull and bear markets.
This bull market has defied a host of negatives since early March 2009.
It also benefitted from economic rebounds here and abroad and a sharp rebound in corporate earnings.
Currently, new negatives are beginning to challenge a market selling close to the all-time highs of an S&P 500 that has appreciated 2003% bottom to top.
The negatives are well known – ISIS, Ukraine, end of the Fed’s QE and uncertainty about interest rates.
Newcomers on the block though are a softening in economies abroad and the impact that a strong dollar stands to have on corporate earnings.
The International Monetary Fund (IMF) cut its economic outlook for Japan, Brazil, and European countries. Germany’s industrial production is in a tailspin, and China’s growth is lagging.
Input from these countries was needed by the U.S. economy to extend future growth here.
Q3 earnings are expected to increase 4.9% for the quarter, but that estimate is down from 7.8% in July according to a Bloomberg study.
The Street is still in a quandary over what to expect after QE ends this month and when interest rates will increase.
This uncertainty is causing increased volatility which one day favors the bulls, the next day favors the Bears.
Small wonder Mark Twain railed on October as a “peculiarly dangerous month to speculate in stocks,” though added the other 11 months to his list, as well.
TODAY:
It looks like some major portfolio adjustments are underway now that Q4 has started.
Support/resistance levels are more easily read in stable and at extremes in the market. Not so, when a market is dominated by uncertainty or a news whipsaw.
Based on what I see here, the Street hasn’t decided which way the market should go. It wants to buy, but is spooked by uncertainties referred to above.
A rally failure here stands to result in a spike below DJIA: 16,674; S&P 500: 1,926; Nasdaq Comp.: 4,367, providing nimble traders with a short-term opportunity.
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Investor’s first read– Daily edge before the open
DJIA: 16,719
S&P 500: 1,935
Nasdaq Comp.:4,385
Russell 2000: 1,076
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TECHNICAL ANALYSIS EACH of 30 DOW INDUSTRIALS (10/7 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 10/3 close: Resistance 17,009; Primary Support: 16,514; and Secondary Support: 16,267.
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 possibility of a major war resulting must be considered.
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THIS WEEK’s ECONOMIC REPORTS:
Light week for reports on the economy. FOMC meeting, minutes released Wednesday, but no press conference. For detailed analysis of both the U.S. and Foreign economies along with charts, go to www.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:
ICSC Goldman Store Sales (7:45): Up 0.1 pct. in Oct. 4 week vs. drop if 0.2 pct. in the prior week. Yest/year is +3.9 pct.
JOLTS (10;00): There were 4.835 million jobs open Aug. 31 vs. 4,605 million in Jly.
FOMC Meeting begins
WEDNESDAY:
MBA Purchase Apps/ Refi’s (7:00):
FOMC Minutes (2:00): No Press Conference
THURSDAY:
Jobless Claims (8:30):
Wholesale Trade (10:00):
FRIDAY:
Import Export Prices (8;30):
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RECENT POSTS:
Sept, 24 DJIA 17,055 Critical Crossroads for Money Managers
Sept. 25 DJIA 17,210 Back to Tug of War – Bulls vs. Bears
Sept 26 DJIA 16,945 Moment of Truth for Market’s Direction
Sept. 29 DJIA 17,113 Huge Test for Bulls Today
Sept. 30 DJIA 17,071 Big Move in Market for Winner of Tug of W ar
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 ?
*Stock Trader’s Almanac
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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