Market Poised for Sharp Move

George Brooks |

WednesdayAugust  27 , 2014     9:14 a.m.  BEFORE the OPEN


Daily guidance: Boiling down fundamental, technical, economic,

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


    Once again, sellers put a lid on the S&P 500 at the 2000 level, but didn’t break it down.  The Bulls were aided by good news on the economy (Durable Goods, Consumer Confidence) and the  potential for peace in Gaza and Ukraine.

    Generally, efforts to achieve peace in these hotspots are short-lived, given to several “on – off – on’s” before anything concrete is worked out, i.e., be prepared for a resumption of conflict again, then news of a truce, then renewed conflict, etc. – a nasty news whipsaw.


    I expected resistance at the 2000 level for the S&P 500, and we have gotten that for two days. It appears that a number of institutions planned to sell into the buying that often accompanies the breaking of  “visible” levels that attract a lot of press (and buyers).

    While buying has hit a wall at the 2000 level, there are not enough sellers to turn the market down.  It’s a tug of war and has to be watched closely.  A sharp move either way now is possible. The Bears best bet was for an immediate drop after the first break above 2000.  A stall suggests the Bulls are hanging tough.

    This one has to be watched very closely.  It is on the verge of a sharp move as soon as the Bull/Bear joust yields a winner.

     A break below DJIA 17,075; S&P 500: 1,996; Nasdaq Comp.: 4,552 would do technical damage.

Investor’s first readDaily edge before the open

DJIA: 17,106

S&P 500: 2,000

Nasdaq  Comp.4,570

Russell 2000:  1,175



    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. 


   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.



   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.



      Big week for reports in all areas.  For detailed analysis of both the U.S. and Foreign economies along with charts, go to 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 (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


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


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%)


Jobless Claime (8:30):


Coprporate Profits (8:30):

Pending Home Sales (10:00)

Kansas City Fed Mfg. Ix.(11:00):


Personal Income/Outlays(8:30):

Chicago PMI (9:45)

Consumer Sentiment (9:55) 



Aug. 11  DJIA   16, 553 Rebound to Good News – How Far ?

Aug. 12  DJIA   16,569  News Whipsaw – Watch Your Back !

Aug. 13  DJIA   16,560  Rally ?  Be Very Careful !

Aug. 14  DJIA   16,651  Better Off Now than in October 2007 ?

Aug. 18  DJIA   16,662  All Eyes on Fed at Jackson Hole Thursday

Aug. 19  DJIA   16,838  Increasing Speculative Fever

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


A Game-On Analysis,  LLC publication

George  Brooks

“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.







DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of 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:


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