Tuesday, August 12 , 2014 9:13 a.m. BEFORE the OPEN
Stock prices shot up last Friday on what was perceived as an improved outlook in Ukraine and Iraq, but the follow through Monday was unimpressive, most likely because the Street didn’t expect the good news to last.
Investors who jumped in late Friday and at the open Monday are now having second thoughts. The reason: they may get whipsawed by a return of bad news.
TODAY:
In spite of weakness in the market for most of last week, 17 of the 30 Dow industrials traced out respectable reversal patterns capable of supporting a nice technical rally.
But there was no follow through in 14 of them, in fact all of the 14 failed to hold their modest gains for the day. While these patterns can be classified as a one-day-reversal, their action was not dramatic, just unimpressive.
It looks like they are “testing” last week’s support, something that shouldn’t have happened so soon.
The market needs a show of commitment by the Bulls, or it is going lower, and it isn’t going to be pretty. Odds favor they will show up – just watch your back.
Support today is DJIA: 16,495; S&P 500: 1,926; Nasdaq Comp.: 4,376
Resistance today is: 16,616; S&P 500: 1,940; Nasdaq Comp.:4,413
Investor’s first read– Daily edge before the open
DJIA: 16,569
S&P 500: 1,936
Nasdaq Comp.:4,401
Russell 2000: 1,141
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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 ?
THE FED:
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.
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TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS
(UPDATED ANALYSIS: AUGUST 8
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 16,391 and more extended downside risk to 16,264.
Note: My daily support/resistance levels are more short-term oriented
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THIS WEEK’s ECONOMIC REPORTS:
Not too much happening this week with economic reports.
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.”
TUESDAY:
NFIB Small Business Optimism Ix. (7:30): Index improved to 95.7 in June from 95.0 in May
ICSC Goldman Store Sales (7:45): Dropped 1.4 pct. in Aug 9 week: Year/year +3.2 pct. vs. +4.1 pct week prior.
JOLTS – Job Openings Labor Turnover (10:00):
WEDNESDAY:
MBA Purchase Apps (7:00):
Retail Sales (8:30):
Business Inventories (10:00):
THURSDAY:
Jobless Claims (8:30):
Impost Export Prices (8:30):
FRIDAY:
PPI-FD (8:30):
Empire State Mfg Ix. (8:30):
Industrial Prod. (9:15):
Consumer Sentiment (9:55):
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RECENT POSTS:
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
Aug. 8 DJIA 16, 368 News Whipsaw = Increased Volatility
Aug. 11 DJIA 16, 553 Rebound to Good News – How Far ?
*www.agaryshilling.com
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.
