Monday, July 7, 2014
NOTE: This report was written on Sunday for release on Monday and will therefore not take into consideration news or futures trading immediately prior to Monday’s open.
This bull market has survived countless crises since it began in early February 2009, racking up a gains of DJIA: 165%, S&P 500: 198%, 255% Nasdaq Composite, and the Russell 2000: 253%.
Following a sharp January correction this year, these indexes are up DJIA: 11.2%, S&P 500: 14.3%, Nasdaq: 13.0%, Russell 2000: 11.6%.*
Reports on the economy in recent weeks have been upbeat. June payroll data announced last Thursday handily beat expectations with Non-Farm hires up 288,000 and a drop in the Unemployment rate to 6.1% from 6.3%, suggesting the spring rebound from a severe winter is robust.
What investors must be concerned about now is how much of the spring rebound in the economy has been discounted by rising stock prices.
This raises the possibility of a correction/consolidation in coming months. If timed right, this would offer attractive opportunities for traders and investors alike.
Right now, speculative fever for getting in on the action may press stock prices higher and higher with risks increasing for new buys.
We are about to enter the Q2 corporate earnings minefield, where stocks failing to comfortably “beat” Street projections can get clobbered.
It is a good idea to check the date of any holdings in advance of the earnings release at www.whisper.com or any other source you use.
TODAY:
Presently, I don’t see a bull market top, just a resting phase. While the market averages are up significantly, they are not exceptionally higher than at the prior bull market highs in 2007 when horrendous problems were beginning to surface, triggering the worst recession/bear market since the 1930s.
Since the October 2007 bull market highs, the indexes are up DJIA: 19.5%, S&P 500: +25.9%, Nasdaq Comp. +56.8%, Russell 2000: +42.0%.
Time will tell if the Fed can unwind its QE stimulus without serious economic, stock and bond market repercussions, but these levels may be reasonable.
What won’t be reasonable is what is bound to happen eventually – a wild speculative binge featuring low-priced stocks.
As of Thursday’s close
Support today is DJIA: 16,996; S&P 500:1,976; Nasdaq Comp.: 4,465
Investor’s first read– Daily edge before the open
DJIA: 17,068
S&P 500: 1,985
Nasdaq Comp.: 4,485
Russell 2000: 1,208
NOTE: I will be travelling and will not have access to the Internet between July 6 and July 20, ergo no post here until the 21st.
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TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS
(UPDATED ANALYSIS: July 1)
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.
Yesterday’s breakout prompted me to run the analysis again. While my near-term upside remains the same at 17,109, the reasonable near-term downside jumps to 16,875 as of the close July 1. I did not calculate an extreme downside this time.
Note: My daily support/resistance levels are more short-term oriented.
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THIS WEEK’s ECONOMIC REPORTS:
The schedule for economic reports is light this week.
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 Consumer Spending Measure (8:30)
TUESDAY:
NFIB Small Business Optimism Ix. (7:30):
ICSC Goldman Store Sales (7:45):
JOLTS –Job Openings/Labor Turnover (10:00):
Consumer Credit (3:00);
WEDNESDAY:
MBA Purchase Apps/Refi’s (7:00):
FOMC Minutes – no press conf.(2:00)
THURSDAY:
Jobless Claims (8:30):
Wholesale Trade (10:00):
FRIDAY:
Treasury Budget (2:00)
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RECENT POSTS:
June 20 DJIA 16,921 Spike Up Likely, No Room for Rally Failure
June 23 DJIA 16,947 Spike, Correction – Opportunity
June 24 DJIA 16,937 Market to React to Week’s Economic Reports
June 25 DJIA 16,818 Major Challenge for Bulls
June 26 DJIA 16,867 Again – Bulls Challenged
June 27 DJIA 16,846 Near-Term Tipping Point for Stock Prices
June 30 DJIA 16,851 Stock Fever Festering
July 1 DJIA 16,826 Week’s Economic Reports – Dow 17,000 ?
July 2 DJIA 16,956 Speculative Fever Mounting – Careful !
July 3 DJIA 16,976 Sideways Trading Range After DJIA 17,098
*I use intraday high/low
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 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.
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