Market Really Wants to Run, but.....

George Brooks |

Investor’s first read – Daily before the open

DJIA: 16,583

S&P 500: 1,878

Nasdaq Comp.: 4,071

Russell 2000: 1,1.07

Monday , May 12, 2014 9:05 a.m.


This market wants to go higher, even Nasdaq stocks look ready for a bounce. The chance of a spring surge is still on the table. Obviously, the Street needs to see some sharply improved economic data. More so, it needs to see upwardly revised corporate guidance.

We are entering the summer months, which tend to be subdued aside from one or more sharp rallies. The market “top” callers have been taking their cuts, mostly basing their opinions on “overvaluation.” P/E RATIOS ranged so widely over the years no “average” is reliable, especially if calculated over 50 - 75 years.

This bull market has the potential to go much higher.

Support: DJIA: 16,566; S&P 500: 1,876; Nasdaq Comp.: 4,061

Resistance: DJIA: 16,674; S&P 500: 1,891; Nasdaq Comp.: 4,109.


There is a Head & Shoulders Top Formation (H&S) in the Nasdaq Composite. For non-chartists, that is a pattern in the trading that traces out, (you guessed it) a left shoulder, a head, and a right shoulder, sans eyes, ears, nose and mouth.

The projected technical damage here would be down to 3,550 (-12.4%), assuming it breaks decisively below 3,950 first.

A word of caution. These patterns can be a giant head-fake with the index (or stock) suddenly reversing to the upside crushing short sellers. Such a head-fake occurs more in early stage markets, like it did with the DJIA in mid-July 2009 with the DJIA at 8,359.

This one looks a little to obvious. Be careful. A lot of damage has occurred in the Nasdaq Comp. already. Its daily pattern indicates steady selling pressure which will need some kind of selling climax to reverse, but not from as far down as 3,550.

This H&S pattern does not exist in the DJIA, S&P 500, or Russell 2000 indexes.


Sell in May and Go Away ?? Not so fast !

That’s a cute little jingle and the media/financial writers enjoy these things, but they can be misleading. May has offered a number of timely exits, but I don’t buy the “stay away” part, clearly not until November.

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.



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 was 16,204 and more severe downside : 16,132. The current upside potential was 16,594, which was momentarily topped last Thursday.


The rebound out of the sever winter stall cannot be robust without a rebound in housing. We should get read on that shortly. I would expect the first indication to show up in housing stocks. On February 18, I listed five stocks that should provide an early indication of a recovery in housing industry.

The group has stabilized in recent weeks, even shown signs of strength, but the jury is still out.

Beazer Homes (BZH) $19.60

PulteCorp (PHM) $18.32

Toll Brothers (TOL) $34.09

KB Homes (KBH) $15.85

DR Horton (DHI) $22.01



Changes every day. Is currently an uncertainty that can become a negative IF Russia

Crosses the Ukraine border,



A much lighter schedule this week with only one housing related report – MBA Purchase applications coming early Wednesday. Today we get the PMI Services Index and ISM Non-Mfg. Index, 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.”


No major reports


NFIB Small Business Optimism (7:30):

Retail Sales (8:30):

Import/Export Prices (8:30):

Business Inventories (10:00):


MBA Purchases (7:00):

PPI FD (8:30):

Housing Market Index (10:00):


CPI (8:30):

Jobless Claims (8:30):

Empire State Mfg. Ix. (8:30):

Industrial Production (9:15):

Philly Fed. Survey (9:55)


Housing Starts (8:30)

Consumer Sentiments (9:35)



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

Apr 29 DJIA 16,448 Market Direction – Still a Toss Up

Apr 30, DJIA 16,535 Sell in May and Go Away ??

May 1 DJIA 16,580 Money Manager Dilemma – Plunge Now

May 2 DJIA 16,558 Big Move in the Offing ?

May 5 DJIA 16,512 Bear Calling Bulls Out

May 6 DJIA 16,530 Wild Ride to Continue

May 7 DJIA 16,401 Techs Headed fo Slaughterhouse - a Huge Selling Climax Buy

Looms for Nimble Trader

May 8 DJIA 16,518 Major, Major Bull/Bear Crossroads

May 9 DJIA 16,583 Head & Shoulders Top NASDAQ ?? Careful !

*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 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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