selective - Stock Pickers' Market

George Brooks |

TODAY:

   The market would love to run, but there is still a sense of uneasiness about Ukraine.

   This suggests a stock pickers’ market more so than a big move in the market averages.

   The market closed yesterday on my minor support levels for the Dow and S&P. I’ll stick with my secondary support at DJIA: 16,304 (S&P 500: 1,862), barring any major jolts internationally.

SUMMARY:

   Right now, three factors are calling the shots in the market.

UKRAINE:

The crisis in Ukraine triggered a sharp plunge in prices Monday, but the market rebounded to get its losses back on Tuesday when Russia’s president Putin assured the world it did not plan a military invasion unless absolutely necessary. While this situation has cooled down since Monday, expect occasional sparks to ramp up tensions on occasion.

U.S. ECONOMY:

   How much of the U.S. economic slowdown is weather related ? That’s what the Fed would like to know, but according to the content of its “Beige Book,” released yesterday the economy was adversely impacted by harsh weather in many regions of the country, cutting into production and hiring, disrupting supply chains and deliveries.

   While the Beige Book reported modest improvements in eight of the Fed’s12 districts, retail sales, especially auto sales and housing were casualties.

   The next FOMC meeting (first since January) will be held on March 18-19 when the Fed can weigh data on the economy to decide  whether to continue to taper out of QE.  Odds are, it will continue its monthly reduction.

EUROPE:

   Foreign Economies, especially Europe, could be the kicker. While more data is needed, the early returns over the last four weeks are encouraging with economists predicting improvements in  Germany, France, the Netherlands and Italy

   What’s more,  the MSCI Emerging Markets stock index advanced 3.2% in February after plunging 6.6% in January.

CONCLUSION:

   This bull market will be known for climbing the steepest “wall of worry” in modern times, maybe ever. Like the pink rabbit, it grinds on, undeterred.

    I think it can run the full cycle, ending in a wild speculative binge with small stocks leading the charge powered by buying by the less sophisticated investor coming off the sidelines late to the party as usual.

   These investors need more convincing than others, making the plunge very close to the bull market top.

Investor’s first reada daily edge before the open

DJIA:  16,360

S&P 500:  1,873

Nasdaq  Comp.: 4,357

Russell 2000: 1,205

Thursday, March 6, 2014, 2014   9:13 a.m.

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A  BEST SIX MONTHS to own stocks – No more corrections ???

   Over the years, the Stock Trader’s Almanac* has expounded on its significant finding that the stock market performs better  between November 1 and May 1 than between May 1 and November 1.

   The Almanac’s  “Best Six” goes back to 1950..  The six months is a snapshot between November and May.  Many major market advances often start before November, but the point made  here is the period between fall and May is where the action is.

  The six months between November 1 and May 1, have consistently outperformed the six months between May 1 and November 1

   Is this going to be another “BEST six months to own stocks ? .   So far, the DJIA is ahead  5.4% since October 31, 2013 even with a 7% correction in the interim. 

   Over of the last 25 years, Nov.1 to May 1, have produced 19 up-years, 3 flats and 3 downers. The “Best Six” years averaged gains of 11.8% with the best year up 25.6% (1998 – 1999). 

   Over the last 25 years, there have been 14 corrections ranging between 6% and  16% during this November1  to May1 period.

  We have had one correction so far since October 31, another correction is possible, but unlikely.

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JANUARY BAROMETER

As January goes, so goes the stock market for the year, according to the January Barometer (JB).* The 3.6% drop in the S&P 500 in January suggests a very challenging year for investors and clearly not as rewarding as 2013 when the S&P 500 rose 29% after a 5.8% rise in the preceding January.

   The JB boasts an 89% accuracy rate over the years with most of its misses explained by unpredictable events, such as war and  extreme bull/bear turning points.

   The rationale for the JB  having predictable value is that a new year is accompanied by year-end and new year portfolio adjustments and decisions based on  projections for the year ahead. It is also a time when institutions receive a lot of new money that must be put to work.

So far in 2014, the S&P 500 is unchanged. However, since January 31, its up 4.0%.  Conclusion: As a barometer, it still suggests a  challenging year for both bulls and bears.

……………………………………………………………………….

THE ECONOMY:

The economic calendar  is loaded this week with both economic and housing 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:Motor Vehicle Sales: Jan. sales were  at a 15.2 mil. ann. Rate vs. 15.4 mil in Dec..

Personal Income/Outlays (8:30): Personal Income rose 0.3 pct.  in Jan. vs no change Dec.  Spending increased 0.4 pct. vs a 0.1 pct increase in Dec..

PMI Mfg. Ix,(8:30): Feb. jumped to 57.1 from 53.7 in Jan..

ISM Mfg.Ix.(10:00):Feb index rose 1.9 points to 53.2 from 51.3 Jan..

Construction Spending (10:00): Jan. up 0.1 pct. vs gain of 1.5 pct. Dec.

TUESDAY

ICSC Goldman Store Sales (7:45): Up 0.3 pct. for Mar. 1 week.  Year over year up 1.5 pct.

WEDNESDAY:

MBA Purchase Apps (7:00): Surged 9.0 pct. for the Feb. 28 week vs. a drop of 4 pct the prior week.

ADP Employment Report (8:15): 139,000 new jobs were created in February.

PMI Services Ix.(8:58): Index dropped to 53.3 from 56.7 (weather ?)

ISM Non-Mfg, Ix.(10:00): Up 1.0 points in Jan. to 54.0.

THURSDAY:

Jobless Claims (8:30): Dropped 26,000 for week ended Mar. 1.

Productivity/Costs (8:30):

Bloomberg Consumer Comfort Ix. (9:45):

Factory Orders (10:00)

FRIDAY:

Employment Situation (8:30):

International Trade (8:30):

Consumer Credit (3:00p.m.):

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RECENT POSTS:

2014

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

  George  Brooks

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

*Stock Trader’s Almanac

sensiblesleuth@gmail.com

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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