Tuesday, October 21, 2014 9:02 a.m. BEFORE the OPEN
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Daily: Boiling down fundamental, technical, economic, monetary, fiscal, psychological, and seasonal data into a quick read.
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While there are serious negatives overhanging this market ( Europe, Russia, ISIS, Ebola), it looks like the major swing factor is the Fed and Q3 earnings plus future expectations.
We will know next week (Oct. 29) whether the Fed plans to extend bond purchases in light of weakness in Europe’s economy.
So far, the Street likes Q3 earnings, as the market climbs back out of the September/October 9.9% correction.
Two questions apply here: One, will the Fed extend bond purchases, if not will that decision adversely impact the market?
Two, will the BIG money sell into the current rise in stock prices if it sees trouble ahead?
TODAY:
IBM’s loss of 12.95 points yesterday cost the DJIA 83 points, due to the fact the average is price-weighted, enabling big changes in one or a few of its 30 stocks to impact the average.
The first major level of resistance is DJIA 16,600; S&P 500: 1,926; Nasdaq Comp.: 4,365, but the real hurdle would be in the area of DJIA 17,000; S&P 500:1,970; Nasdaq Comp.: 4,525.
Currently, this is a rally after a correction and should run into sellers as it moves up, adding risk to new buying.
But, the negative news cycle can swing positive, just as quickly as it swung negative. The march of the Islamic State could hit a wall, the fear of Ebola could wane, deflation fear prove unjustified, and Europe’s economic woes take a turn for the better.
Any one, or a few of these negatives could worsen, turning stocks downward. A lot will be learned from the intensity of this technical rebound and how well it chews away at overhead supply as it moves up.
If the BIG money wants out, it will be lying in wait at slightly higher prices. If it doesn’t, the “Best Six Months”** for owning stocks (Nov. 1 to May 1) will kick in late this month of in November with an extension of this bull market and increased speculative fever.
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Investor’s first read– Daily edge before the open
DJIA: 16,399
S&P 500: 1,904
Nasdaq Comp.: 4,316
Russell 2000: 1,094
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FOMC MEETING Oct. 28 – 29: WILL FED EXTEND BOND PURCHASES?
Last week, James Bullard, a non-voting Fed official, stepped in suggesting bond purchases could be extended which would be huge if ultimately true. When? There is no press conference scheduled after its FOMC meeting next week, Oct. 28.* If they schedule one, odds strongly favor a special announcement indicating if it plans to extend bond purchases, which would be a tipoff. If the Fed is going to do this it will have to this month or in December, since there is no meeting scheduled for November.
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BULL MARKET RETRACEMENT:
A One-third retracement of the five and a half year bull market would take the DJIA down to 13,714 (S&P 500: 1,568) and it can get there in face of the right negatives. A one-third retracement of any major move is not out of the question., just not the norm.
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TECHNICAL ANALYSIS EACH of 30 DOW INDUSTRIALS (10/17 close)
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 16,735; Primary Support: 15,894; and Secondary Support:15,290.
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.
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INTERNATIONAL TENSIONS:
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.
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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:
ICSC Goldman Store Sales (7:45):
Existing Home Sales (10:00):
WEDNESDAY:
MBA Purchase Apps/Refis (7:00)
Consumer Price Ix (8:30):
THURSDAY:
Jobless Claims: 8:30):
Chicago Fed Nat’l Activity Ix (8:30):
FHFA House Prices (9:00):
PMI Mfg Ix. (9:45):
Leading Economic Inds. (10:00):
Kansas City Fed Mfg Ix. (11:00):
FRIDAY:
New Home Sales (10:00):
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RECENT POSTS:
Oct. 8 DJIA 16,719 Extreme Volatility = Risk, but Opportunity
Oct. 9 DJIA 16,994 Bad News is Good News ? Pure Insanity !
Oct. 10 DJIA 16,544 Last Man Standing – Bear – or Bull ?
Oct. 13 DJIA 16,544 A Dangerous Rally – Dow 16,000 this Week ?
Oct. 14 DJIA 16,321 Technical Bounce – Easy Does It !
Oct. 15 DJIA 16,315 Risk: DJIA 14,666 (-1,655 pts.) by Oct 31
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
*Note: Correction: There “is” an FOMC meeting next week Oct. 28-29, there just isn’t a press conference “scheduled” to accompany it (yet).
** Stock Trader’s Almanac
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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