Tuesday, September 23 , 2014 9:13 a.m. BEFORE the OPEN
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Daily:Boiling down fundamental, technical, economic,
monetary, fiscal, psychological, and seasonal data into a quick read.
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Alibaba (BABA: $89.89) closed down $4.00 yesterday, after hitting a post-IPO high of $99.70 Friday, suggesting it was overpriced, or maybe just that the hot money planned an early exit, because it suspects all the hoopla accompanying it was a “signal” that the Street has become indifferent to “risk.”
With two exceptions (February and July/August), corrections have been followed by rebounds, conditioning the Street to expect that pattern to persist, so long as the Fed leads the Street to believe interest rates will rise later rather than sooner.
This is the kind of environment that can catch investors off guard.
Investors become conditioned to buy after a minor correction of 2% – 3% or so only to discover new negatives have surfaced drive stock prices lower, and the next thing you know the market is off 6%……8%…..12% !
There is enough of a chance this will happen, to take precautions.
Is this just another setback that will be followed by a rebound ?
That question should be answered shortly. Buyers have been quick to jump in on minor corrections in the past, if they fail to do so aggressively now, it would indicate a change in the market’s MO, and that would be a short-term , though potentially painful, negative.
The S&P 500, Nasdaq Composite, and Russell 2000 took bigger hits yesterday than the DJIA. My scan of the charts of each of the 30 Dow industrials turned up 22 negative patterns, 4 positive and 4 neutral. This scan is preliminary and will require more time to gain validity. Even so, its preliminary serves as a caution sign.
A cash reserve is warranted any time several of a long list of warning signs appear. It defends against a loss and arms investors with buying power to take advantage of lower prices if a correction develops.
TODAY:
Expect a mixed-to-down open. If trading is quiet during the first half hour, expect an attempt to rally. Otherwise, expect the market to probe lower in search of buyers.
Resistance todayis DJIA 17, 238; S&P 500: 2,003; Nasdaq Comp.: 4,547.
Support today is DJIA 17,107; S&P 500: 1.987; Nasdaq Comp.: 4,503
Investor’sfirst read– Daily edge before the open
DJIA: 17,172
S&P 500: 1,994
Nasdaq Comp.:4,527
Russell 2000: 1,129
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THE FED: No more Yellen press conferences until Dec. 17
The Street wanted clarification on the Fed’s interpretation of interest rates remaining low for a “considerable time,” a term used since last March. They got it Last Wednesday when Fed Chief Janet Yellen emphasized that rates are unlikely to rise quickly as the economy continues to improve, saying, “Even after employment and inflation are near mandate-consistent levels, economic conditions may for some time warrant keeping the target federal funds rate below levels the committee views as normal in the longer run.”
The Fed projects a rise in the Federal Funds rate to 1.375 by the end of 2015
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INTERNATIONAL TENSIONS:
Ukraine/Russia – quiet for now, but has the potential to get uglier.
ISIS/Iraq/Syria – A Euro/Mid-East coalition is forming to counter ISIL’s territory and influence quest.
This can get uglier than ugly where it is now. The possibility of a major war resulting must be considered.
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THIS WEEK’s ECONOMIC REPORTS:
Big week for 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.”
MONDAY:
Existing Home Sales (10:00): Declined1.8 pct in Aug. Year/year is down5.3 pct.
TUESDAY:
ICSC Goldman Store Sales: Up 0.1 pct. from prior week. Year/year up 4.1 pct.
FHFA House Price Ix (9:00):
PMI Mfg. Ix. (9:45):
Richmond Fed Mfg. Ix. (10:00):
State Street Investor Confidence Ix (10:00):
WEDNESDAY:
MBA Mtge Purchase/Refi Ix.(7:00):
New Home Sales (10:00):
THURSDAY:
JoblessClaims(8:30):
Durable Goods (8:30):
PMI Svcs flash Ix. (9:45):
Kansas City Fed Mfg Ix (11:00)
FRIDAY:
GDP (8:30):
Corporate Profits (8:30):
Consumer Sentiment (9:55):
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RECENT POSTS:
Sept. 8 DJIA 17,173 Bullish Storm Surge Imminent ?
Sept. 9 DJIA 17,111 Bulls to be Tested Today
Sept. 10 DJIA 17,013 Stock Market Back on the “Edge”
Sept, 11 DJIA 17,068 Last Chance for Bulls to Avoid Crunch
Sept. 12 DJIA 17,049 The Fed, Elections, Geopolitics Stymie Bulls
Sept. 15 DJIA 16,987 A Brief Yellen Rally This Week ?
Sept. 16 DJIA 17,031 Street Keying on Yellen’s Wednesday Comments
Sept. 17 DJIA 17,131 Yellen Rally Risky – Raise Some Cash
Sept. 18 DJIA 17,156 Will BIG Money Sell Into Strength ?
Sept. 19 DJIA 17,265 Alibaba Frenzy – a Sell Signal ?
Sept. 22 DJIA 17,279 Another Test for the Bulls
*Stock Trader’s Almanac
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.
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