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March to Set Stage for Spring Rally

SUMMARY: Yesterday’s firm tone to trading suggests Monday’s sharp move up was a sign institutions see a spring pick up in the economy and they are not going to wait for the snow

SUMMARY: Yesterday’s firm tone to trading suggests Monday’s sharp move up was a sign institutions see a spring pick up in the economy and they are not going to wait for the snow covering so much of the United States to melt.

   Granted there are some rough spots in the U.S. economy, some weather related, but on the bright side, we have not yet seen a heating up in the economy, the kind than marks excess.

   If money managers expect that phase to develop in a year or two, there is room to run for the stock market, though not in a straight line.

   The market averages almost look too upbeat to expect a big leg up right now. Moves up or down are not that obvious, so a little shakeout before a spring rally must be considered.  Some cash should he held in reserve just in case an opportunity develops to buy at lower prices.

   Investors should get ready for an abrupt change in consumer and investor sentiments when warmer weather breaks out.  The BIG money won’t wait for the winter ice to thaw. If it sees a little daylight it will pounce.


Support: DJIA: 16,245 (S&P 500:1,851). Breaking those levels, look for s drop to DJIA: 16,155 (S&P 500: 1,840).

Resistance: 16,374 (S&P 500: 1,865)

Investor’s first reada daily edge before the open

DJIA:  16,272

S&P 500:  1,854

Nasdaq  Comp.: 4,318

Russell 2000: 1,187

Friday, February 28, 2014, 2014   9:13 a.m.



   Fed chief Janet Yellen, testifying before the Senate Banking Committee yesterday, assured senators the Fed planned to continued its measured pace of tapering with the final taper expected in the fall, unless a softening in the economy justifies a change.

   She did note that the unemployment rate of 6.5% is not cast in stone as a threshold for moving off  its zero interest rate policy, that any decision on rates would be based on a  broad range of indicators, a policy she referred to as “qualitative guidance.”

   The second GDP estimate for Q4 came in  at an annual rate of 2.4%, lower than the first estimate of 3.2% for GDP. This compares with Q3’ GDP rate of growth of  4.1%.  The Fed will have to factor in a weaker final quarter of 2013 and what it means for Q1, since it wasn’t as heavily impacted by weather.   



   Housing stocks responded positively over the last eight days to bad industry news. Severe winter weather has been blamed for the morbid data, which included the Housing Market Index, MBA Purchase Applications, Housing Starts, Existing Home Sales, and the S&P Case-Shiller Home Price Index.

   I began tracking the following housing industry  stocks Monday, February 17, in order to gauge the impact bad news had on them.

   If they held up well in face of bad news, it stands to reason the severe weather masked underlying strength. If the stocks plunged it would be confirmation the weakness was real.

   The stocks not only stood their ground, they extended their rally Wednesday when the group got its first piece of good news that January New  Home Sales jumped 9.0%. Pending Home Sale will be reported at 10:00 a.m. today..

   The reaction of this group bodes well for the economy as a whole, since housing is vital for its continued recovery.

Beazer Homes(BZH: Friday, Feb. 14 – $21.26): Thursday close: $23.50

PulteCorp(PHM: Friday, Feb 14: -$20.02): Thursday close: $21.29

Toll Brothers (TOL: Friday, Feb. 14 – $37.79): Thursday close: $39.10

KB Homes(KBH: Friday Feb.  – $19.03):Thursday close: $20.67

DR Horton(DHI: Friday, Feb. 14- $23.62):  Thursday close: $24.87



A  BEST SIX MONTHS to own stocks – No more corrections ???

   Over the years, the Stock Trader’s Almanac* has expounded on its significant finding that the stock market performs better  between November 1 and May 1 than between May 1 and November 1.

   The Almanac’s  “Best Six” goes back to 1950..  The six months is a snapshot between November and May.  Many major market advances often start before November, but the point made  here is the period between fall and May is where the action is.

  The six months between November 1 and May 1, have consistently outperformed the six months between May 1 and November 1

   Is this going to be another “BEST six months to own stocks ? .   So far, the DJIA is ahead  6.0% since October 31, 2013 even with a 7% correction in the interim. 

   Over of the last 25 years, Nov.1 to May 1, have produced 19 up-years, 3 flats and 3 downers. The best years averaged gains of 11.8% with the best year up 25.6% (1998 – 1999).

   With the market off to a great start in October , it looked like  a BEST six months was a no-brainer. This concerned me, since my research indicated that

prior to the January –February correction, I warned over the last 25 years, there have been 14 corrections ranging between 6% and  16% during this November1  to May1 period. Seven of those started in January, two in December and four in February.

  We have had one correction so far since October 31, another correction is possible, but unlikely. 

   Over the last 25 years, only two corrections occurred during the November 1 to May1 six months.  In 2002 there was a 6.2% correction in January and a 6.5% correction in March/April.  In 2003, there was a 7.0% correction in Nov. 2002/December 2002 and  a 12.9% correction in January/March of 2003.



As January goes, so goes the stock market for the year, according to the January Barometer (JB).* The 3.6% drop in the S&P 500 in January suggests a very challenging year for investors and clearly not as rewarding as 2013 when the S&P 500 rose 29% after a 5.8% rise in the preceding January.

   The JB boasts an 89% accuracy rate over the years with most of its misses explained by unpredictable events, such as war and  extreme bull/bear turning points.

   The rationale for the JB  having predictable value is that a new year is accompanied by year-end and new year portfolio adjustments and decisions based on  projections for the year ahead. It is also a time when institutions receive a lot of new money that must be put to work.

So far in 2014, the S&P 500 is unchanged. However, since January 31, its up 4.0%.  Conclusion: As a barometer, it still suggests a  challenging year for both bulls and bears.



The economic calendar  is loaded this week with both economic and housing reports.

For detailed analysis of both the U.S. and Foreign economies along with charts, go 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) Plunged in Jan.  to a minus 0.39 from a minus 0.03 (revised) in Dec.

PMI Services Flash (8:58) Dropped sharply in Feb. to 52.7 from 56.7. Weather blamed.

Dallas Fed Mfg.(10:30)Unchanged in Jan. but better than projections at 2.5.


FHFA House Price Ix. (9:00): Dec. was up 0.8 pct. vs. 0.1 pct. increase Nov.

S&P Case-Shiller Home Price Ix.(9:00): Increased 0,6 pct. in Dec. vs.  0,9 pct. increase Nov.

Consumer Confidence (10:00): Feb down 1.3 points to 78.1, however Present Situation was up 4.41 points to 81.7

Richmond Fed. Mfg. Ix.(10:00): Feb. slipped to minus 6 from a plus 12

State Street Investor Confidence Ix.(10:00): Confidence among institutional investors rose sharply in Feb. To 123.0 from 114.7 in Jan..


MBA Purchase Apps.(7:00): Index dropped 4.1pct. in the shortened Feb 21 week; Refi’s down 11%.

New Home Sales (10:00): Jan, home sales jumped 9.0 pct. to 468,000  homes at an annual rate vs. a 427,000 rate in Dec..


Durable Goods Orders (9:30) Jan. dropped less than expected (-0.1 pct.) vs a 5.3 pct. drop in Dec..

Jobless Claims (8:30)  Dropped 3,000 for the week ended 2/15 to336,000.

Bloomberg Consumer Confidence Ix.(9:45): Improved to 7-week high of minus 28.6 for the 2/23 week up from 3minus 30.6.

Fed chief Yellen speaks (10:00)

Kansas City Fed. Mfg Ix.(11:00) Index for Feb. was 4 vs. 5 in Jan. and minus 3 in Dec.


GDP – second est. Q4 (8:30): Q4 second est. is a 2.4 pct. annual rate vs. Q3’s 4.1 pct and above the first  GDP est. of 3.2 pct.

Chicago PMI (9:45)

Consumer Sentiment (9:55)

Pending Home Sales(10:00)




Feb 11  DJIA  15, 801 Market Crossroads – Up ? or Down ?

Feb 12  DJIA  15,994  Bulls in Charge, but……….

Feb 13  DJIA  15,963 Suddenly, Concern for the Economy

Feb 14  DJIA  16,027 Buyers Panicking ?

Feb 18  DJIA 16,154  A Brief Pause or More Upside ?

Feb 19  DJIA 16,130  Can Market Shake Off Ugly Housing Data ?

Feb 20  DJIA 16,040 Winter Slump – Spring Rebound ?

Feb 21  DJIA 16,133 Housing Hanging Tough – a Harbinger ?

Feb 24  DJIA 16,103 Bull Market – the Pressure to Act

Feb 25  DJIA 16,207 Rally Failure – or Start of Another Up Leg ?

Feb 26  DJIA 16,179 Monday’s Market Action – a Signal ?

Feb 27  DJIA 16,198 Market Setting Stage for an Early Spring Rally

  George  Brooks

“Investor’s first read – an edge before the open”

*Stock Trader’s Almanac

[email protected]

The writer of  Investor’s first read, George Brooks,  is not 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. Brooks may buy or sell stocks referred to herein.










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