Wednesday, June 25, 2014 9:03 a.m. BEFORE the OPEN
We got the spike and rally failure I expected all in one day yesterday. Now the market must weigh in on this week’s economic reports which are off to a positive start.
Just how the Street reacts if this week’s reports end up as good as they started will tell us whether the Street is still on the Fed teat.
Shame on them if they are, because reality says interest rates will rise in face of a warming economy, which must happen, or this stock market is over-priced.
The final read on Q1 GDP (8:30 a.m.) was a decline of 2.9% vs. a prior estimate of minus 1.0%. We are well aware Q1 was heavily impacted by severe weather, so this number is history and obviously not as important as numbers going forward.
There is the potential for a trampoline effect here where the rebound from the depressed economy will distort the data in the other direction in coming months.
I have been writing about the prospect for a sideways trading range for the next several months instead of higher and higher stock prices, and I think that is on the table. Even so, that kind of market would represent an opportunity for in-and-out traders, as well as for longer term investors who want to use dips to buy.
The upper and lower limits of that trading range have yet to be established, but would probably come close to DJIA 16,400 and 17,000.
The market may open a smidge on the downside today, since yesterday’s plunge needs a little more downside before rebounding in an attempt attack the all-time highs posted in recent days.
Yesterday’s plunge in prices caught the Street by surprise so an initial rally today is suspect to the limits of resistance set here.
Minor support today is DJIA 16,776; S&P 500: 1,944; Nasdaq Comp.: 4,339.
Resistance to a reboundtoday is DJIA: 16,864; S&P 500: 1,956; Nasdaq Comp.: 4,366.
Investor’s first read– Daily edge before the open
S&P 500: 1,949
Russell 2000: 1,173
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
(UPDATED ANALYSIS: June 20)
At key junctures, I technically analyze each of the 30 Dow industrials seeking a reasonable near-term support and a more extreme support level, as well as a 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 the close June 20, the near-term upside for the DJIA is 17,117. Reasonable support is 16,811, more extreme support is 16,718
Note: My daily support/resistance levels are more short-term oriented.
THIS WEEK’s ECONOMIC REPORTS:
Look for a very heavy schedule of releases on the economy this week, especially Monday and Tuesday for the housing industry.
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.”
Chicago Fed Nat’l Activity Ix.(8:30): May up to 0.20 from Apr. minus 0.32
PMI Mfg Flash Ix. (9:45): Markit flash index for June up to 57.5 from 56.4 (final May). New orders 61.7 vs. 58.8
Existing Home Sales (10:00): Up 4.9 pct. May vs. gain of 1.5 pct. Apr./ Yea/year minus 5.0 pct vs. minus 6.8 pct.
ICSC GoldmanStore Sales (7:45): Up 2.0 pct. in 6/21 week vs +0.4 pct. week ago. Year/year now +4.1 pct. vs +3.1 a year ago
FHFA HousePrice Ix. (9:00): Unchanged in April after a 0.7 pct. gain in Mar..
S&P Case Shiller HPI (9:00)): Up 0.2 pct. Apr. vs. gain of 1.2 pct. Mar..
New Home Sales (10:00): Surged 18.6 pct. in May to an annual rate of 504 million units
Consumer Confidence (10:00): June index rose to 85.2 from 82.2 in May (revised).
Richmond Fed Mfg.(10:00): May index dropped to 3 from 7, but new orders up to 4 from 3.
MBA Purchase Apps (7:00): Both apps and refi’s slipped 1.0 pct in the June 20 week following sharp drops the week before.
Durable Goods Orders (8:30): Down 1.0 pct. in May vs. +0.4 pct. in Apr./ Ex-transport may was +0.6 pct. vs. -0.8 pct..
GDP (8:30): Final read for Q1 was down 2.9 pct. vs. the prior prelim est. of down 1.0 pct.
Corporate Profits (8:30):
PMI Services Flash (9:45):
Jobless Claims (8:30):
Personal Income/Outlays (8:30):
Kansas City Fed. Mfg. Ix.(11:00):
Consumer Sentiment (9:55):
June 9 DJIA 16,924 Stock Market Breakout – Now What ?
June 10 DJIA 16,943 Greed/Fear Ratio, Not P/Es, Drive the Market
June 11 DJIA 16,945 Watch Trampoline Effect for Stocks
June 12 DJIA 16,843 Sideways, 3-Month Trading Range Beginning ?
June 13 DJIA 16,734 Iraq Crisis to Create Buying Opportunity
June 16 DJIA 16,775 Uncertainty – A Menace t Stock Prices Near-Term
June 17 DJIA 16,781 Decision Day for Stock Prices – Near-Term
June 18 DJIA 16,808 Market Awaits a Fed QE Exit Strategy
June 19 DJIA 16,906 Wall Street Needs a Dose of Reality
June 20 DJIA 16,921 Spike Up Likely, No Room for Rally Failure
June 23 DJIA 16,947 Spike, Correction – Opportunity
June 24 DJIA 16,937 Market to React to Week’s Economic Reports
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“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.