Rally to Give Investors a Good Read Near-Term

George Brooks |

ThursdayAugust  7, 2014      9:13 a.m.  BEFORE the OPEN

SUMMARY:

    Bulls held the line yesterday as stocks stabilized.  We are looking at a probing process where stock prices are seeking  a level that discounts known uncertainties and negatives.

    The Bulls would like to take advantage of lower prices, but are wary of getting blindsided by new negatives.

    I can see volatility extending into September/October.

TODAY:

While the major market averages failed to penetrate yesterday’s resistance levels (DJIA: 16,912, S&P 500: 1,903, Nasdaq Comp.: 4,314), expect another try today.

    Odds favor a couple good days.

    A rally failure here would raise the risk of another leg down.

    Resistance today is: DJIA: 16,506; S&P 500: 1,930; Nasdaq Comp.: 4,386.

    Support today is : DJIA: 16,420; S&P 500: 1,917; Nasdaq Comp.: 4,346.

    Failure to hold that level would lead to a test of the DJIA 16,370 level; S&P 500: 1911; Nasdaq Comp.: 4,325.

    Investor’s first readDaily edge before the open

DJIA: 16,443

S&P 500: 1,920

Nasdaq  Comp.:4,355 

Russell 2000:    1,125

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.

     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.

   

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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

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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.”

MONDAY:

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

WEDNESDAY:

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

THURSDAY:

Jobless Claims (8:30): Claims dropped 14,000 in the Aug. 2 week to 284,000, lowest since 2006.

Consumer Credit (3:00):

FRIDAY:

Productivity/Costs (8:30);

Wholesale Trade (10:00):

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RECENT POSTS:

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 ?

*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.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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