Fed Decision - Major Market Reaction

George Brooks |

Wednesday, October  29, 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.


   The stock market has recouped most of what it lost in September’s 9.4% plunge in the S&P 500, thanks to less concern about negatives like ISIS, Ebola,  economies abroad, and Russia, as well as positive contributions by Fedspeak and Q3 earnings.

   Most likely, the Fed’s QE bond buying program ends with an announcement today, though its low interest rate policy will continue.

   Part of the 10-day surge in the stock market has been based  on hopes that the Fed will extend bond purchases beyond its deadline this month per comments made last week by Fed’s James Bullard.  We will get a feel for how much bullishness has been drawn from this belief after the FOMC minutes are released.

    What’s really important here is, can the Street wean itself from its addiction to the comfort of knowing QE is there to ensure support for the economy ?   

    At some point, the Street must graduate to reality.

    Support and resistance for the stock market is entirely dependent of what the Fed says today. No press conference is scheduled, so a major policy change is unlikely.


Investor’s first readDaily edge before the open

DJIA: 17,005

S&P 500:  1,985                               

Nasdaq  Comp.: 4,564

Russell 2000:1,149



    A 9.9% slide in the S&P 500 was reversed last week by St.Louis Fed President James Bullard’s timely comment that it would be a “logical policy response” for the Fed to announce an extension of its  bond purchases following its  FOMC meeting today.

    Bullard set a dangerous precedent, the expectation that the Fed will step in to halt future plunges of more than 5% - 6%  in the stock market.

    The stock market should be allowed to find its own level of comfort or discomfort, without  the Fed stepping in to change its direction. 

    So much of a stock’s price is simply a matter of opinion based on a number of factors, varying in importance over time. A wide range of valuations over the years attests to that.

    Propping the market up before it can flush out sellers and attract buyers stands to set up a bigger break in the future when nothing the Fed can say will stop the slide.  Micro-management creates a phony market where forces of supply and demand are ignored as the Street looks to the Fed for a cue as to which way to run.   

    MY concern here is that the Fed keeps blowing air into the balloon and we all know what happens in time.



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 17,409; Primary Support: 16,880; and Secondary Support: 16,820.

   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 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.”


PMI Services –flash (9:45): Oct. index was 57.3 down from 58.9 in Sept.

Pending Home Sales (10:00): Up 0.3 pct. in Sept. vs. down 1.0 pct. Aug.

Dallas Fed Mfg. Ix. (10:30): Index slipped to 10.5 in Oct. from 10.8 in Sept.


FOMC Meeting begins

ICSC Goldman Store Sales (7:45): Up 0.3 pct. in 10/24 week; Year/year +2.8 pct.

Durable Goods (8:30): Down 1.3 pct. in Sept. after drop of 18.2 pct. Aug.  Ex-Trans +3.3 pct. vs. +8.7 pct. Aug.

S&P Case Shiller Home Price (9:00): Down 0.1 pct. Aug. vs increase of 0.1 pct. Jly.

Consumer Confidence (10:00): Index for Oct. is up to 94.5 from 89.0 in Sept.

Richmond Fed Mfg Ix. (10:00):  Index for Oct. is 20 vs. 14 in Sept.


MBA Purchase Apps (7:45):  Apps down 5.0 pct. ; Refi’s down 7.0 pct. in 10/24 week.

FOMC announcement (200): No press conference scheduled (yet)


GDP: Q2c – Final revision(8:30):

Jobless Claims (8:30):


Personal Income/Outlays (8:30):

Chicago PMI (9:45):

Consumer Sentiment (9:55):




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

Oct. 24   DJIA   16,677  DJIA – a Portfolio of Small Cap Stocks ?

Oct. 27  DJIA    16,805  Wednesday: Wall Street: Pass, or Fail

Oct. 28   DJIA   16,817  Bullard Bull !!


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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