Friday, August 8 , 2014 9:13 a.m. BEFORE the OPEN
Yesterday’s rally attempt ran into a wallin face of fears that Russia may invade Ukraine and that oil prices may shoot up as the United States and allies begin selected air strikes in Iraq.
Stock prices plunged after hitting my resistance levels for the second time in two days, and bond prices rose here and abroad forcing interest rates downward in a flight to safety.
At 6 a.m., stock-index futures were trading off sharply, but rallied as news hit that Russia was seeking to de-escalate the crisis in Ukraine.
This has become a news sensitive market, jerked around by conflicting reports about hotspots in the Mid-East and Europe.
In a news whipsaw market, no sooner do investors jump in thinking the coast is clear, than new news turns it down. Fearful that a downswing has further to go in face of ugly news, investors bail out, shortly before a change in news for the better turns it back up.
Lurking in the background are some lingering doubts about the intensity of the U.S. economic rebound from a harsh winter and the adverse impact sanctions on Russia and rising oil prices will have on a struggling European economy.
Money managers want to keep buying stocks, they have to, their clients insist on it Appetites have been whetted by this grand bull market.
But money managers are reluctant to buy aggressively, fearful of getting blindsided by changing news.
As a result, the market will rally sharply at times, only to turn down as money managers refuse to chase stocks at higher prices.
That spells “volatility” and a market that needs to find a comfort level that discounts known and potential negatives.
Nimble traders may be able to scalp profits, but risks are high.
Resistance today is DJIA: 16,408; S&P 500: 1,915; Nasdaq Comp.:4,344
Support today: Breaking DJIA 16,320, S&P 500: 1,904; Nasdaq Comp.: 4,320, look for a drop to DJIA 16,246; S&P 500: 1,894; Nasdaq Comp.: 4,296 respectively.
Investor’s first read– Daily edge before the open
S&P 500: 1,909
Russell 2000: 1,119
IS THE ECONOMIC RECOVERY FAILING TO GAIN TRACTION ?
Depends on who you ask. A.Gary Shilling, publisher of “INSIGHT” * challenged government press releases in an August 4, Special Report, “After the Government Report Releases.”
Among the first to warn readers in advance of the Great Recession, Shilling was quick to point out that the July 30, Q2 GDP report of an annualized gain of 4.0% was misleading with 1.66 percentage points attributed to a change in inventories, bringing the growth number down to 2.3%, a rate he feels is not great enough to “spawn meaningful growth in wages and labor income.” Excess inventories that are not worked off by sales penalize future production.
He attributes last week’s plunge in the stock market to the Street’s concern that the economy is not rebounding.
If he is right, the question arises, Will the Fed have to revise its taper schedule ?
We will hear more cautionary comments from the Fed going forward in an attempt to ease an interest rate hike when its reality hits early next year. The Fed does not want speculative fever to run rampant prior to the rate increase.
The Fed’s “easing in” policy is bad news for those who want the feeding frenzy to continue unabated, but good news for investors who opt for a more stable market and an inevitable crunch instead of crash.
Along the same lines, Dallas Fed President, Richard W. Fisher recently indicated the economy was getting significantly closer to “liftoff,” suggesting to me and obviously others, that interest rates may rise sooner than expected. Based on various projections that could be Q1 or early Q1.
TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS
(UPDATED ANALYSIS: AUGUST 5
At key junctures, I technically analyze each of the 30 Dow industrials seeking a reasonable near-term support and a more extreme support leyel, 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.
After yesterday’s crunch, Iran my analysis based on the July 31 closeand concluded the near-term upside for the DJIA HAS DROPPED TO 16,765, a reasonable downside from here is 16,206 and more extended downside risk to 15,884.
Note: My daily support/resistance levels are more short-term oriented
THIS WEEK’s ECONOMIC REPORTS:
The economic report schedule is heavy this week with a good balance between housing, service, production and employment
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.”
Gallup U.S. Consumer spending Measure (8:30): July daily spending was $94 vs. $91 in June.
ICSC Goldman Store Sales (7:45): Same store sales were up 0.2 pct. in the June in Aug 2 week vs the prior week. Year/year is at a +4.5 pct. rate.
PMI Services. Ix. (9:45): Index was 60.8 in July vs. 61.0 in June
Factory Orders (10:00): June surged 1.1 pct. after a 0.6 pct. drop in May (rev.)
ISM Non- Mfg Ix. (10:00): July 58.7 vs June 56.0; New orders were 64.9 vs. 61.2 in June.
Global Composite PMI (11:00): July was 55.5 vs. June’s 55.4
MBA Purchase App (7:00): Dropped 1.0 pct. in Aug 1 week, Refis up 4.0 pct.
Int’l Trade (8:30): International trade deficit narrowed in June to $41.5 billion from $44.7 billion in May
Jobless Claims (8:30): Claims dropped 14,000 in the Aug. 2 week to 284,000, lowest since 2006.
Consumer Credit (3:00): Rose $17.3 billion in June, mostly as a result of non-revolving credit expansion (Auto loans), not revolving credit (retail).
Wholesale Trade (10:00):
July 22 DJIA 17,051 Significance of Yellen’s Warning
July 23 DJIA 17,086 Feeding Frenzy in Low-Priced Stocks Imminent ?
July 24 DJIA 17, 113 Taper’s End Fully Discounted – 2015 Interest Rates Not
July 25 DJIA 17,083 Is Market Action Setting Stage for a Leg Up ?
July 28 DJIA 17,960 Big Week – Economic Reports/Q2 Earnings
July 29 DJIA 16,982 Quite Before the Storm ?
July 30 DJIA 16,912 Market on the Verge of Big Move ?
July 31 DJIA 16,880 Huge Test for Bulls
Aug. 1 DJIA 16,563 False Alarm, or ………
Aug. 4 DJIA 16,493 Trader’s Buy, but Risks are High.
Aug. 5 DJIA 16,569 Bulls “Must” Step In Now, or…….
Aug. 6 DJIA 16,429 Is The Economy Really Rebounding ?
Aug. 7 DJIA 16,443 Rally to Give Investors a Good Read on Near-Term
A Game-On Analysis, LLC publication
“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.