SUMMARY:
I sense some nervousness in the Street about the level of stock prices. I have been uneasy for a number of days, since I felt a major upward extension of the rally that started in April needed a robust rebound in the economy this spring, not just a good one.
I see references to historic price/earnings ratios with conclusions based on current stock prices being above an average going back they don’t say how far. Averages can be worthless, or distorted at best, it all depends on the years covered and the events that impacted them. This is the kind of stuff money managers feed computers who make their decisions for them.
At extremes, P/Es signal opportunity to buy or sell, but their enormous range between high and low over the years reduces the credibility of an average significantly.
The level of P/Es is a product of human emotions, greed and fear. While stock prices have soared over the last five years, I believe the greed/fear ratio is somewhere in the middle of extreme high and low.
This market is not yet generating the overwhelming compulsion to buy stocks and especially to buy ridiculously over-priced stocks. Actually, the extremes of the Greed/Fear ratio is not so much quantifiable as it is a matter of opinion, a well-seasoned sense of investors’ behavior.
While some see P/Es as high now, I don’t see the Greed/Fear ratio as high.
Corrections – YES. Bear market – NO.
TODAY:
Odds favor a small correction at the open can reverse with a healthy gain for the day.
Support today is DJIA 16,876; S&P 500: 1,943; Nasdaq Comp.: 4,316
Resistance today is still DJIA: 17,015; S&P 500: 1,959; Nasdaq Comp.: 4,341.
Investor’s first read– Daily edge before the open
DJIA: 16,943
S&P 500: 1,951
Nasdaq Comp.: 4,336
Russell 2000: 1,175
Tuesday, June 10, 2014 9:15 a.m.
EUROPE:
The European Central Bank’s cut of its benchmark interest rate and announcement to employ additional measures to stimulate European economies stands to help the U.S. economy, as well. It did little to boost stock markets abroad which are trading at six-year highs, suggesting the move was already discounted. Even so, let’s consider it a positive.
TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS
At key junctures, I technically analyze each of the 30 Dow industrials seeking a reasonable near-term support and short-term resistance level. By technically studying the balances of buying and selling in each stock, then converting that data back to the DJIA using the “divisor” (0.1557159) I can get a better reading on the average itself. The DJIA is a price-weighted average and subject to distortion by higher priced issues.
As of June 9, the support for this calculation is 16,801 and resistance is 17,176.
Note: My daily support/resistance levels are more short-term oriented.
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HOUSING: Objective accomplished – will discontinue coverage
I began to track the following housing stocks earlier this year, hoping to gain some insight into the strength of the economic recovery emerging from a severe winter.
My reasoning was that a robust economic recovery cannot develop without a contribution from the housing sector.
While the industry stats for housing lagged, the stocks rebounded in late May and to-date in June.
Monday, PHM, KBH and DHI extended breakouts from consolidation patterns, TOL broke out of one, and BZH demonstrated strength within a consolidation pattern.
PARTIAL LIST :
Beazer Homes (BZH) $19.27
PulteCorp ($PHM) : $20.23
Toll Brothers (TOL) : $37.27
KB Homes (KBH) : : $17.29
DR Horton (DHI) : $24.61
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THIS WEEK’s ECONOMIC REPORTS:
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:
NFIB Small Bus. Optimism Ix. (7:30): May index up to 96.6 from 95.2
ICSC Goldman Store Sales (7:45) Sales down 2.8 pct. in June 7 week from a gain of 2.9 pct. the prior week. Year/year now +3.0 pct. vs +3.1 pct.
JOLTS (10:00) Job Openings/Labor Turnover
WEDNESDAY:
MBA Purchase Apps (7:00)
Treasury Budget (2:00)
THURSDAY:
Jobless Claims (8:30)
Retail Sales (8:30)
Bus. Inventories (10:00)
FRIDAY:
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RECENT POSTS:
June 2 DJIA 16,717 Decision Time for Stocks ?
June 3 DJIA 16,743 Economy “Must” Accelerate, or…
June 4 DJIA 16,722 Correction in Stocks Without Robust Economic Rebound
June 5 DJIA 16,737 Bulls Must Pick It Up, or Lose the Ball
June 6 DJIA 16,836 Easy Does It ! Dow 20,000, But Not in Straight Line
June 9 DJIA 16,924 Stock Market Breakout – Now What ?
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 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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