SUMMARY:
It’s obvious there is a shift in market leadership out of Tech stocks and into lower valuation issues. However, that shift can produce some outstanding buying opportunities in Tech stocks at lower levels. The Techs, et al, didn’t have a big run because they didn’t have superior growth potential, or because the Street didn’t like to run them up.
They will find a level where over-valuation crosses over to under-valuation, perhaps a technical selling extreme when their prices hit the “ouch point.”
The BIG money may not let that happen, but it would be a good idea for investors to decide which ones they would be comfortable owning and at what price.
The Street is hopeful for news that the economy is emerging from a severe winter slump. It may get answers this week (See below: This Week’s Economic Reports).
Without a meaningful rebound in the economy, the stock market will have to adjust downward.
TODAY:
A week ago, I listed resistance levels for five popular Tech stocks in the event they attempted to rally. They rallied but didn’t reach those levels before turning down again. I also noted Google, $528 at the time, needed a big buyer or it would test $500, probably touch down at $506.It hit$502.80 yesterday before closing at $517. Without dramatic news, I would expect the $524 level to offer resistance to the upside with another test of $500 possible. Another spanking of the Tech stocks calls for a spike down to $476. Unlikely, but possible.
Minor supportis: DJIA: 16,398; S&P 500: 1,863; Nasdaq: 4,049.
Resistance to the upside is: DJIA: 16,496; S&P 500: 1,874; Nasdaq: 4,098.
Investor’s first read– Daily before the open
DJIA: 16,448
S&P 500: 1,869
Nasdaq Comp.:4,074
Russell 2000: 1,117
Tuesday, Apri1 29, 2014 9:10 a.m.
TECHNICAL ANALYSIS OF 30 DOW STOCKS ( as of 4/25)
At key junctures, I technically analyze each of the 30 Dow industrials then convert that data back into a projected DJIA. I seek a reasonable downside and a more severe downside, as well as a projected upside potential. This is a short-term projection, assuming no significant change in news. My reasonable downside is 16,204 and more severe downside : 16,132. The current upside potential is 16,594
HOUSING:
Housing stocks got big buying last Thursday in spite of poor industry reports. Some of that was short covering but it looks like bargain hunters couldn’t resist. A big drop in the overall market Friday dragged the group lower. However, housing stocks barely responded on Monday when it was reported that March’s Pending Home Sales rose an impressive 3.4%, after nine months in the doldrums. At times, it takes a few days for the Street to digest news, but it should have been ready for this release ahead of time. (See below: “HOUSING STOCKS”)
If new or existing home buyers think these rates are high, they should look back in time to 6%, 8% and 10% rates. The reality is rates are going up, and so are home prices. At some point, home buyers will have to buy, or the market may be out of reach indefinitely.
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SELL in MAY, and Go Away ?
NONSENSE ! SELL IN MAY and STAY for one or more trading opportunities before November 1.
You are already seeing articles about this seasonal phenom in the press and newsletters. Essentially, it is the backend of the “Best Six Months”* to own stocks (November 1 to May 1). Obviously, the message here is of the two six month periods, May to November is the worst for stocks.
This is true, but as I have noted with the Best Six Months, a lot can happen in the interim.
This bromide can’t be taken as a “given.” Of the 26 years I studied a “top” occurred in May on 10 occasions ranging from May 1 to May22. Two occurred in June and two in July. No meaningful top occurred in 12 of the years studied.
On far too many occasions over the last 26 years a May top was followed by a decline, but within months (well before Nov. 1) the market rallied sharply. I see it more as a trading opportunity – i.e. “Sell in May,” but be ready to buy back after a plunge.
Studies like this have to have a cut-off date, but are really intended to be accepted with an open mind, i.e. as May 1 approaches, move closer to the exit mentally, and be ready to lock in some profits and raise some cash.
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RUSSIA/UKRAINE
Russia’s annexation of Crimea was only the first step in President Putin’s power grab.Undoubtedly, he plans to stir additional unrest in sections of Ukraine where Russian speaking people are in great numbers. A military response by Ukraine would give him reason to invade Ukraine to protect pro-Russians and that would have an impact on global markets, which are vulnerable to begin with.
One of the factors that turns a normal market correction of 3% to 5% into a much bigger correction (5% to 12%) is new negatives that hit the market when it is about to rebound from the 5% correction. A sharp escalation in the Russia/Ukraine situation could be one of those factors. yesterday, the U.S. announced it was sending 600 soldiers to Poland as a sign of support.
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EUROPEAN ECONOMIES:
Manufacturing output , new orders and exports are up for the eighth consecutive month, suggesting its recovery is real, though not yet robust. Our economy has
scratched and clawed its way out of a horrendous recession without help from Europe. Obviously, a recovery there stands to accelerate the pace of our recovery here.
The IMF’s latest global economic forecast as it meets in Washington this week. It sets global economic growth at 3.6% in 2014 and 3.9% for 2015, up from 3% in 2013.
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HOUSING STOCKS –
The following stocks barely budged after it was reported that Pending Home Sales surged 3.4% in March.
PARTIAL LIST:
Beazer Homes(BZH) Thursday: $18.72
PulteCorp(PHM) Thursday $18.25
Toll Brothers (TOL) Thursday $34.31
KB Homes(KBH) Thursday $16.27
DR Horton(DHI) Thursday $22.54
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THIS WEEK’s ECONOMIC REPORTS:
This is a huge week for economic reports – huge. It may still be a month early to get a read on whether the economy will surge out of its winter slump, then too we may get the clues we have been looking for.
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:
Pending Home Sales (10:00): Surged 3.4 pct. in Mar. vs 0.5 pct. Feb. March jump ends 9-mo. Slide. Beat estimates of minus 1.7 pct. to plus 2.0 pct.
Dallas Fed. Mfg. (10:30): April’s production Ix. jumped to 24.7 from 17.1 in March
TUESDAY:
FOMC Meeting begins
ICSC Goldman Store Sales (7:45):
S&P Case-Shiller Home Price Ix.(9:00)
Consumer Confidence (10:00):
WEDNESDAY:
ADP Employment Rpt. (8:15):
GDP (8:30):
Chicago PMI (9:45)
FOMC Meeting announcement (2:00):
THURSDAY:
Jobless Claims (8:30):
Personal Income/Outlays (8:30):
PMI Mfg. Ix. (9:45):
ISM Mfg. Ix. (10:00):
Construction Spending (10:00):
FRIDAY:
Employment Situation (8:30):
Factory Orders (10:00):
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RECENT POSTS:
Apr 8 DJIA 16, 245 Buying Opportunity Possible Early Monday
Apr 9 DJIA 16,256 April Opportunity Looms
Apr 10 DJIA 16,437 Swing Factor: Q1 Earnings, Spring Rebound
Apr 11 DJIA 16,170 Computer Selling = Scary Plunge = Opportunity
Apr 14 DJIA 16,026 Spring Surge Still in the Cards
Apr 15 DJIA 16,173 Selling Climax Still to Come ?
Apr 16 DJIA 16,262 Reversal – the Start of the Spring Surge ?
Apr 17 DJIA 16,424 Beware – Earnings Distortion
Apr 21 DJIA 16,408 A Very Important Week for Stocks
Apr 22 DJIA 16,449 Stock Market – Coiling Spring ?
Apr 23 DJIA 16,514 Today – a Test for the Bulls
Apr 24 DJIA 16,501 Surge in Stocks – Is Economy Next ?
Apr 25 DJIA 16,501 Bears Put to Test
Apr 28 DJIA 16, 361 Pivotal Week – Economy – Stock Market
*Stock Trader’s Almanac
A Game-On Analysis, LLC publication
George Brooks
“Investor’s first read – an 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 r
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