Monday, August 11 , 2014 9:04 a.m. BEFORE the OPEN
Only days ago, the outlook in Ukraine and Iraq was grim and stocks plunged. The outlook for both brightened Friday as Russia concluded military exercises close to Ukraine’s border and U.S. air strikes stalled the advance in ISIS forces.
Stock prices shot up Friday erasing the losses sustained during the week.
This is the news whipsaw in action. No sooner does dominating news drive stock prices in one direction, than a change in the news reverses the trend altogether.
Even the nimblest of traders have difficulty being on the right side of the market. Trying can cause excessive trading and chew up capital with a lot of small losses. Clearly, buying on strength and selling on weakness compounds the problem.
In the background, but no less important lurks a concern that the Fed may allow interest rates to begin to notch up sooner than expected.
The Fed itself can contribute to the whipsaw. It only takes a hint by a Fed official or misread by the Street of its intentions.
The economy here is healthy though not robust, not so abroad where sanctions against Russia are taking a toll, especially in Germany.
TODAY:
Investors should be prepared for more whipsaw action as news or uncertainty intervene to slow or reverse the uptrend started Friday.
Even while the market was sliding last week, stability was beginning to take hold. Of the 30 Dow industrials, 17 traced out respectable reversal patterns last week , which are capable of supporting a nice technical rally. A test of that support will occur this week, but without a news change, should be successful.
Support today is DJIA: 16,514; S&P 500: 1,927; Nasdaq Comp.:4,365
Resistance today is 16,749; S&P 500: 1,952; Nasdaq Comp.: 4,388
Investor’s first read– Daily edge before the open
DJIA: 16,553
S&P 500: 1,931
Nasdaq Comp.:4,370
Russell 2000: 1,131
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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):
ICSC Goldman Store Sales (7:45):
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
*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.
