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Rally Failure Risk, But Trader’s Buy Looms

TODAY:    The risk of a rally failure today is high, unless Russia pulls back its  forces now that Crimea is “theirs.” The danger here is that this is just the beginning


   The risk of a rally failure today is high, unless Russia pulls back its  forces now that Crimea is “theirs.” The danger here is that this is just the beginning !

    The Street doesn’t want to give up on this bull market, but there has been sellers  on nine attempts to rally in the past seven days.

Resistancestarts at DJIA 16,136 (S&P 500: 1,849).  Breaking that, the market has a shot at DJIA: 16,229 (S&P 500: 1,857).

Support:  A break below DJIA 15,998 (S&P 500: 1,834) risks a quick drop to DJIA: 15,907 (S&P 500: 1,823).

   Friday is Quadruple Witching Day when contracts for stock index futures, stock index options, stock options and single stock futures expire.  The simultaneous expiration of all four on the same day can be disruptive, resulting a  wide swing in prices.  All four expire on the third Friday of  January, March, June, and September.



   Suddenly the Street is faced with a host of  negatives,namely Russia/Ukraine (and beyond),  softness in the Chinese and Japanese economies and the possibility that the softness in the U.S. economy may NOT be as weather related as thought.

   All this and a market that has done little to adjust for adversity.

   This stands to be a key week for the stock market, since we will begin to get an early read on Russia’s intentions and the West’s reaction, as well as on our economy with the release of production and housing reports.

   Fed chief Janet Yellen will hold a press conference Wednesday at 2:30 p.m..

   As widely expected, Crimea opted for Russian rule in a referendum Sunday.  The surprise here is pre-market trading indicates higher prices at the open.

   I can buy that IF all Russia wants is Crimea. If its land grab extends beyond Crimea, the situation could get very ugly. I don’t think it’s over

   Part of the strength in the U.S. market is attributable to expectations that the economy will emerge robustly from  winter with a big catch-up in retail, auto, corporate spend and housing.

   If  that doesn’t happen, and Russia doesn’t withdraw its troops for its border, this market is headed south.

    The reasons for selling are justified, in fact, I am surprised the market is not down more.  The Russian situation is serious, nationalism is running high.  With Ukraine and other former Russian “satellite” countries split to varying but significant degree ideologically, a portion speaking Russian, the prospect for civil war looms.

   Sanctions are about the only deterrent the West has, but Russia has cards to play other than military, since it has economic ties to Europe, especially Germany.

  PEACE TALKS: In a news whipsaw market associate with an international    crisis, there are always rumors (or reality) of “peace talks.”  These trigger an immediate and sharp rally with the usual result – nothing comes of it – CAREFUL !

   Any move toward negotiations would hit gold stocks hard.

Investor’s first reada daily edge before the open

DJIA:  16,065

S&P 500:  1,841

Nasdaq  Comp.: 4,245

Russell 2000: 1,181

Monday, March 17, 2014,    9:14 a.m.


   At key junctures, I technically analyze each of the 30 Dow Jones industrials for a reasonable near-term  downside and a more extreme downside, as well as a near-term upside potential. I note the price for each, add them up and divide by the DJIA divisor (0.1557159) and arrive what the DJIA would be if each of the 30 stocks hit my targets.

   As of  Thursday’s close I concluded a reasonable near-term downside  for the DJIA was 15,900, a more severe near-term  downside would be 15,625. The near-term upside would be 16,511.  That’s all assuming the overall news environment doesn’t change.



  Last week New York Fed president Bill Dudley said he believes severe winter weather  has shaved a full percentage point off the nation’s GDP in Q1, Beyond that, Dudley is optimistic since there will be less drag from federal spending cuts, improved household finances, and corporations that are awash in cash.

   Undoubtedly, a break in the winter weather will boost consumer optimism resulting in a surge of retail spending and firm stock prices.

   This transition is critical.  If  severe winter weather  scrunched economic activity, we should see a sharp rebound once warmer weather sets in.  If not, we have a problem.


   Manufacturing output , new orders and exports are  up for the eighth consecutive month, suggesting its recovery is real, though not yet robust. Our economy has scratched and clawed its way out of  a horrendous recession without help from Europe.  Obviously, a recovery there stands to  accelerate our recovery here.


   There is little the “West” can do to prevent Russia from getting its way in Crimea, unless forces within Russia reacting to a flight of capital, plunge in Russian stocks and the Ruble, rising interest rates put a leash on Mr. Putin’s power grab.  

   Don’t take this one too lightly, its potential for disruption in our markets may escalate. What is happening in Crimea has been orchestrated with far too much efficiency to be “locals” exercising their desire to return to their roots – Russia.

    With Crimea, it’s checkmate and looks like one of a number of strategic Russian moves in a regional chess game.  If internal unrest escalates in the Baltic states where one-quarter of Latvia and Estonia see themselves as Russian,  the global picture worsens.

   On March 21,   Russian lawmakers will consider legislation allowing it to  incorporate areas in other countries where  residents want to secede in face of  a dysfunctional central government.


   InvesTech Research’s March 7 edition called attention to the fact gold prices and gold miners’ stocks are down significantly since October 2011 when it warned readers  gold prices were “bubblish”and the bullion and stocks should be avoided. InvesTech incurred the wrath of gold bug subscribers, but was proven prescient when  gold nosedived.

    After a devastating 36% plunge, InvesTech thinks the group deserves a close look, adding  Market Vectors Gold Miners ETF (GDX) to its Model Fund Portfolio and commenting favorably on Barrick Gold Corp. (ABX).

   GDX closed  Friday at $27.73 (52-week range of $35.58 – $20.24) and ABX at $20.91 (52-week range of $29.83 – $13.43).

   Both stocks have moved up since my “Gold Due for a Play ?” post on Tuesday March 11, when GDX was $25.97 and ABX at $19.75.

   If  a civil war breaks out in Ukraine and unrest in the Baltics  surfaces, gold could get a big play from depressed levels.



The economic calendar  features important reports reflecting trends in manufacturing and housing, as well as the big picture, the Leading Indicators.

These reports may still be adversely impacted by severe weather conditions.

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.”


Empire State Mfg Ix. (8:30): Up slightly in Feb. to 5.61 from 4.48; New Orders  were 3.13 vs. minus 0.21 in Jan.

Industrial Production (9:15):

Housing Market Ix. 10:00):


FOMC meeting begins, ends  Wednesday

ICSC Goldman Store Sales (7:45):

Consumer Price Ix. (8:30):

Housing Starts (8:30):


MBA Purchase Apps (7:00):

FOMC announcements (2:00 p.m.):

Pres Conf. Fed chair Yellen: (2:30 p.m.):


Jobless Claims (8:30):

Philly Fed Svy (10:00):

Exiting Home Sales (10:00):

Leading Indicators (10:00):


Quadruple Witching Day




Feb 20  DJIA 16,040 Winter Slump – Spring Rebound ?

Feb 21  DJIA 16,133 Housing Hanging Tough – a Harbinger ?

Feb 24  DJIA 16,103 Bull Market – the Pressure to Act

Feb 25  DJIA 16,207 Rally Failure – or Start of Another Up Leg ?

Feb 26  DJIA 16,179 Monday’s Market Action – a Signal ?

Feb 27  DJIA 16,198 Market Setting Stage for an Early Spring Rally

Feb 28  DJIA 16,272 March Setting Stage for Spring Rally.

Mar 3   DJIA  16,321 Russian Bear Providing American Bull an Opportunity

Mar 4   DJIA 16,168  Crisis Almost Over – Easy Does it on Opening Prices

Mar 5   DJIA 16, 395 Street Reaching for Risk – Sneaky Strong

Mar 6   DJIA 16, 360 Selective – Stock Pickers’ Market

Mar 7   DJIA 16,421  Pivotal Day in the Market

Mar 10 DJIA 16,452  Important Test for the Bulls Today

Mar 11 DJIA 16,418 Gold Due For a Play ?

Mar 12 DJIA 16,351  Crimea – How Big A Negative for Stocks ?

Mar 13 DJIA 16,340  Correction to Set Up An Opportunity

Mar 14 DJIA 16,108  Selling Climax Next Week ?

  George  Brooks

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

*InvesTech Research  – 406-862-7777 ( Truly one of the finest monthly market letters with a host of accurate economic and stock market indicators.

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The writer of  Investor’s first read, George Brooks,  is not 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. Brooks may buy or sell stocks referred to herein.
















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