How Long Will Bulls Prop the Market?

George Brooks |

FridayAugust  29 , 2014     9:10 a.m.  BEFORE the OPEN

………………………………………………………………………………….

Daily:Boiling down fundamental, technical, economic,

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

……………………………………………………………………………………………………….

TODAY:

   With a long weekend coming up, traders may exit early.   Risks of additional adverse developments abroad are a deterrent to big commitments today.

   After a brief drubbing in the first hour of trading yesterday, the market rebounded but not enough to turn positive.

   The downdraft in prices may well have been a warning signal that this market  can tank in a hurry if the Bulls decide to walk away and stay away.

   While they didn’t yesterday, they weren’t aggressive buyers, leaving a meaningful move up  or down for another day.

   Expect a half-hearted attempt to breach S&P 2,000 today, but with three days for something else to go wrong abroad, taking an extra long weekend may be the best decision market movers can make.

    I see juicy technical situations I would buy, and my scan of the 30 Dow industrials reflects a reasonable balance of strength and weakness.

    Yesterday’s market action didn’t answer the question about whether 2,000 on the S&P 500 is a floor or  a ceiling  ?  Maybe next week.

    A powerful burst up through S&P 2,000 would signal more to come and a big spike up.  If the Bulls decide to pack it in and wait for lower prices, we are looking at a nasty correction.  It’s that buying support on any market weakness that has propped this market up.

    I would feel more comfortable buying after a correction, than chasing stocks up, especially after the brief but scary plunge in prices at the open yesterday without earth shattering news.

    A best, it’s a “hit ’n run” trading market – in, but out with quick profits – for now !

Investor’s first readDaily edge before the open

DJIA: 17,079

S&P 500: 1,996

Nasdaq  Comp. 4,557

Russell 2000:  11,165

WHAT ARE THE ODDS OF A BIG CORRECTION OF  8% -12% ?

   I think the odds are getting greater every day.

   Why ? 

   A major correction isn’t factored into many of the Street’s scenarios.  After all the economy is gaining traction, and the Fed  isn’t expected to raise interest rates until mid-2015.

   Outlooks can change quickly, doubts and uncertainties can snowball. Careful !

   >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

INTERNATIONAL TENSIONS:

    While a major military undertaking by the U.S. in the Mid-East would have political consequences here, it does appear the stage is being set for a serious campaign to stop the Islamic State’s advances. A coalition is being formed and the news media is beginning to warn of a threat to our homeland if the Islamic State isn’t stopped !!!

    The unpopularity of an increased military operation  in the Mid-East and uncertainties of  how far it will extend is a negative that is not yet discounted in stock prices. 

    Uncertainty persists in Ukraine as pro-Russia rebels opened up a third front  outside strongholds of Donetsk and Luhansk near the Sea of Azov, suggesting this is far from over regardless of what Russia’s President Putin says.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 

   Looks like the Street likes what Fed Chief Yellen had to say at Jackson Hole last week. She still believes the  labor markets have further to heal before their economies can handle higher interest rates.

   Obviously, the Street finds security in Yellen’s assurance its zero-based interest rate policy is not changing near-term, but that comfort will be short lived if the economy continues to gain traction.

   >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TECHNICAL ANALYSIS OF EACH OF THE 30 DOW INDUSTRIALS (8/25)

   At key junctures, I technically analyze each of the 30 Dow industrials, then using the Dow’s “divisor” convert these results back into the DJIA. I seek a near-term resistance level and a primary and secondary support level.

   As of Aug 22, the near-term resistance level is 17,175; the primary support is 16,870 and secondary support is 16,724.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

INTEREST RATES:On numerous occasions, I have reminded readers that stock prices can rise along with interest rates, but to a point where higher rates draw money away from stocks to bonds and where higher rates adversely impact the economy. Realistically, that point must be a lot higher than the zero-based interest rates existing today. I conceded that the stock market would take a brief hit when a move to higher rates was perceived by the Street, but stabilize before moving higher.

    A recent study by Andrew Garthwaite, chief equity strategist for Credit Suisse concludes just that. Since 1977, he found the S&P 500 peaked no earlier than four months prior to the Fed’s first rate increase, but gained as much as 4 percent in the six months after the first increase. He notes, that while rate rises have increased volatility in the stock market, they did not mark the end of the bull market.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 

THIS WEEK’s ECONOMIC REPORTS:

      Big week for reports in all areas.  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.”

MONDAY:

Chicago Fed. Nat’l Activity (8:30) Index rose sharply to 39 in July  from 21 in June.

PMI Services – flash (9:45): Flash reading is 58.5 in Aug. vs 61.0 in July.

New Home Sales (10:00): July’s annual rate is 412,000, vs. consensus range of 415,000 – 455,000.

Dallas Fed. Mfg, (10:30): Index dropped in Aug. to6.8 from 19.1 in July; New  Orders dropped to 2.2 from 13.2

TUESDAY:

ICSC Goldman Store Sales (7:45): Up 0.6 pct. in Aug. 23 week; Year/year is +4.2 pct.

Durable Goods (8:30)): Aircraft sector  bumped orders up 22.6 pct in July vs. gain of 2,7 pct. in June. Ex transport, orders were up 0.8  pct.

FHFA House Prices (9:00): June up 0.4 pct. vs increase of 0.2 pct May; Year/year + 5.1 pct.

S&P Case-Shiller (9:00): June down 0.2 pct vs. increase of 0.3% May; Year/year +8.1 pct.

NOTE: The reason for the difference between the two is (in short) that FHFA covers 13 more states and hundreds more smaller cities and uses home sale prices and refi appraisals.

Consumer Confidence (10:00): Aug. index up to 92.4 from 90.9 in July.

Richmond Fed. Mfg.(10:00) Aug. index up 5 points to 12; New orders up 8 points to 13.

State Street Investor Confidence (10:00):  Up 7 points in Aug. to 122.8

WEDNESDAY:

MBA Mtge Purchase Apps (7:00): Rose 0.3 pct. in Aug 22 week; year/year down 11.0 pct. Refi’s up 0.3 pct – average rate for conforming loan ($417,000) is 4.28%)

THURSDAY:

Jobless Claims (8:30): Down 1,000 to 298,000 for 8/23 week

GDP(8:30):2nd estimate is +4.2%  for Q2

Coprporate Profits (8:30):Q2 $1.540 trillion vs. $1.735 trillion Q1 – Annual rate  for Q2 was +26.5% vs. 11.0% decline in Q1. Year/year is +4.5%

Pending Home Sales (10:00):  Strong July gain of 3.3% to index of 105.9 – exceeds projections.  Greater inventory and slowdown in price increases helped.

Kansas City Fed Mfg. Ix.(11:00): Index dropped to 3 in Aug. down from 9 in July.

FRIDAY:

Personal Income/Outlays(8:30):

Chicago PMI (9:45)

Consumer Sentiment (9:55) 

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

RECENT POSTS:

Aug. 20  DJIA   16, 919 Is Market Now Vulnerable to Bad News ?

Aug. 21  DJIA   16,979  S&P 2000 to Trigger Selling

Aug  22  DJIA   17,039  Will Street Sell When S&P 500 Breaks 2,000 ?

Aug  25  DJIA   17,001  Stronger Economy – a Game Changer for Fed ?

Aug  26  DJIA   17,076  Bull/Bear Tug of War at S&P 2000 Level

Aug  27  DJIA   17,106  Market poised for Sharp Move

Aug  28  DJIA   17, 122 2,000 on S&P 500 – Floor or Ceiling ?

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 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.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Comments

Emerging Growth

New Age Farm Inc.

New Age Farm Inc is engaged in the development of the agriculture based business in Langley, British Columbia.

Private Markets

BioSculpture Technology, Inc.

BioSculpture Technology, Inc. (“BST”) is a commercial-stage medical device manufacturer of liposuction surgical instruments for surgeons. It offers the FDA-cleared Twin Cannula Assisted Liposuction ("TCAL") Airbrush Liposculptor II® controllers, Airbrush®…

GoCoin

Blockchain currencies (e.g. Bitcoin) provide a new disruptive way to transfer value between parties over the internet as opposed to going through banks. GoCoin provides online merchants with a suite…