Friday, June 27, 2014 9:16 a.m. BEFORE the OPEN
Two days in a row, the major market averages have closed at the highs for the day, defying nervous sellers an upper hand.
The bulls have held their ground, but will have their work cut out for them to drive stock prices significantly higher at this time.
Aside from an ugly Q1 GDP report Wednesday, the economic numbers came in reasonably impressive this week (see below). While St. Louis Fed’s James Bullard warned that interest rates may rise as early as Q1 of 2015, he also projected a 3% growth rate for the GDP for the remainder of 2014, essentially dismissing any dire message sent by the Q1 report.
As a result, the Street is reluctant to buy or sell aggressively. It’s as if it would like to sit back and pick off selected issues of opportunity and not have to reach to buy them. Then too, it is not pressured to sell UNLESS OTHER INSTITUTIONS BEGIN SELLING.
This is a standoff between buyers and sellers. As I see it, odds favor a trading range not yet defined, but one that can be exploited by timers for quick trades, as well as longer term investors seeking to accumulate positions on pullbacks.
There is enough bearish sentiment around to strike some optimism for the upside or at least temper any downside momentum.
Short interest in the ETF, Industrial Select Sector SPDR Fund (XLI) has approached a level last seen in 2012 (+64% year-to-date) according to a Bloomberg survey.
Minor support today DJIA: 16,769; S&P 500: 1,948; Nasdaq Comp.: 4,358
Minor resistance today DJIA: 16,880; S&P 500: 1,960; Nasdaq Comp.: 4,386
Breaking those resistance levels, resistance rises to DJIA: 16,918; S&P 500:1,963; Nasdaq Comp.: 4,394.
Investor’s first read– Daily edge before the open
S&P 500: 1,957
Russell 2000: 1,180
Occasionally, I am asked why I do not refer to a lot of technical indicators. Well, I do monitor ones that have proven to be reliable.
In fact, I have written about most of these indicators long before they were well followed. A lot are redundant, a lot are BS, an attempt to quantify what is rarely quantifiable at key junctures.
What I want to accomplish here is to boil that data down into a quick read prior to the open.
Much of all this is common sense applied to years in the trenches in good and bad markets. A lot is simply judgment.
Buying low and selling high is complicated by human emotions – fear to step in at bargain prices when nobody else is willing to buy and to sell when everyone else is buying and making easy money.
The European Central Bank’s cut of its benchmark interest rate and announcement to employ additional measures to stimulate European economies stands to help the U.S. economy, as well. It did little to boost stock markets abroad which are trading at six-year highs, suggesting the move was already discounted. Even so, let’s consider it a positive.
TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS
(UPDATED ANALYSIS: June 20)
At key junctures, I technically analyze each of the 30 Dow industrials seeking a reasonable near-term support and a more extreme support level, as well as a short-term resistance level. By technically studying the balances of buying and selling in each stock, then converting that data back to the DJIA using the “divisor” (0.1557159), I can get a better reading on the average itself. The DJIA is a price-weighted average and subject to distortion by higher priced issues.
As of the close June 20, the near-term upside for the DJIA is 17,117. Reasonable support is 16,811, more extreme support is 16,718
Note: My daily support/resistance levels are more short-term oriented.
THIS WEEK’s ECONOMIC REPORTS:
Look for a very heavy schedule of releases on the economy this week, especially Monday and Tuesday for the housing industry.
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.”
Chicago Fed Nat’l Activity Ix.(8:30): May up to 0.20 from Apr. minus 0.32
PMI Mfg Flash Ix. (9:45): Markit flash index for June up to 57.5 from 56.4 (final May). New orders 61.7 vs. 58.8
Existing Home Sales (10:00): Up 4.9 pct. May vs. gain of 1.5 pct. Apr./ Yea/year minus 5.0 pct vs. minus 6.8 pct.
ICSC GoldmanStore Sales (7:45): Up 2.0 pct. in 6/21 week vs +0.4 pct. week ago. Year/year now +4.1 pct. vs +3.1 a year ago
FHFA HousePrice Ix. (9:00): Unchanged in April after a 0.7 pct. gain in Mar..
S&P Case Shiller HPI (9:00)): Up 0.2 pct. Apr. vs. gain of 1.2 pct. Mar..
New Home Sales (10:00): Surged 18.6 pct. in May to an annual rate of 504 million units
Consumer Confidence (10:00): June index rose to 85.2 from 82.2 in May (revised).
Richmond Fed Mfg.(10:00): May index dropped to 3 from 7, but new orders up to 4 from 3.
MBA Purchase Apps (7:00): Both apps and refi’s slipped 1.0 pct in the June 20 week following sharp drops the week before.
Durable Goods Orders (8:30): Down 1.0 pct. in May vs. +0.4 pct. in Apr./ Ex-transport may was +0.6 pct. vs. -0.8 pct..
GDP (8:30): Final read for Q1 was down 2.9 pct. vs. the prior prelim est. of down 1.0 pct.
Corporate Profits (8:30): Q1 were $1.907 trillion vs. $1.905 trillion in Q4 or +0.5% (ann. Rate) vs. a 7.9% gain (ann. Rate) Q4. Year/year were up 6.8% vs. 6.0% in prior quarter.
PMI Services Flash (9:45): Markit’s flash Index is up 2.8 points to 61.2 from May’s flash reading and up 3.1 points from May’s final reading. The “flash” reading is Based on 85% of the standard monthly reading and is released about a week before the final reading FYI ! These are post-winter bounce back are strong readings, though
Jobless Claims (8:30):Down 2,000 to 312,000 for 6/18 week.
Personal Income/Outlays (8:30): Personal Income up 0.4 pct./ Personal Expenditures up 0.2 pct.
Kansas City Fed. Mfg. Ix.(11:00): June index was 6, down from 10 in May and 7 in Apr..
Consumer Sentiment (9:55):
June 12 DJIA 16,843 Sideways, 3-Month Trading Range Beginning ?
June 13 DJIA 16,734 Iraq Crisis to Create Buying Opportunity
June 16 DJIA 16,775 Uncertainty – A Menace to Stock Prices Near-Term
June 17 DJIA 16,781 Decision Day for Stock Prices – Near-Term
June 18 DJIA 16,808 Market Awaits a Fed QE Exit Strategy
June 19 DJIA 16,906 Wall Street Needs a Dose of Reality
June 20 DJIA 16,921 Spike Up Likely, No Room for Rally Failure
June 23 DJIA 16,947 Spike, Correction – Opportunity
June 24 DJIA 16,937 Market to React to Week’s Economic Reports
June 25 DJIA 16,818 Major Challenge for Bulls
June 26 DJIA 16,867 Again – Bulls Challenged
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“Investor’s first read – a daily edge before the open”
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