Rally? Be Very Careful!

George Brooks |

WednesdayAugust  13 , 2014      9:07 a.m.  BEFORE the OPEN

  SUMMARY: 

    Yesterday I referred to 17 of the 30 Dow industrials which traced out impressive support patterns last week even in face of a soft market. I noted that their failure to follow through Monday was a cause for concern, that the bulls need to step in  Tuesday to prevent the market from going lower.

     Fifteen of the 17  firmed up just enough to ensure a jump today in early trading. We have a shot at a couple very good days here, assuming the market doesn’t get hit with bad news out of  the Ukraine and/or Iraq. 

    Sanctions on Russia is adversely impacting EU countries, especially Germany. ISIL (Islamic State of  Iraq and Levant (also referred to as ISIS (Islamic State of Iraq and Syria) is looming as a much greater problem than air strikes can handle, and a mounting uncertainty that the market cannot ignore.

TODAY:

Look for a positive open today. This is still a news sensitive market, which suggests an abrupt  change in direction without warning. There is little that can be done  to protect positions from this whipsaw, except to avoid chasing stocks after a sharp move and maintaining a cash reserve for a more stable environment.

Support todayis DJIA 16,541, S&P 500: 1,931; Nasdaq Comp.: 4,382

Resistance todayis DJIA: 16,616; S&P 500: 1,940; Nasdaq Comp.: 4,406.

Investor’s first readDaily edge before the open

DJIA: 16,560

S&P 500: 1,933

Nasdaq  Comp.:4,389 

Russell 2000:    1,133

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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): There were 4.671 million job openings  in last week of June vs. 4.577 million in May. Both the hires rate (3.5%) and separations rate (3.3%) were essentially unchanged.

WEDNESDAY:

MBA Purchase Apps (7:00): Down 1.0 pct. in Aug. 8 week, same as week before Year/year down 10 pct.. Refi’s down 4.0 pct.

Retail Sales (8:30): Flat in July after a 0.2 pct. gain in June

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 ?

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

*www.agaryshilling.com

A Game-On Analysis,  LLC publication

George  Brooks

“Investor’s first read – a daily edge before the open”

Brooks007read@aol.com

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.

 

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