The market ran further than I expected in late February and early March. I wrote of a spring rally two weeks ago, but was expecting it to kick off from lower levels. The market pressed higher until five days ago when it traded down erratically with alternating good and bad days.
Yesterday, I targeted DJIA 16,096 and S&P 500: 1,838 as levels where “some’ support was possible.
I also noted bulls have been buying dips, I warned that if they stepped back look for DJIA 15,815 (S&P 500: 1,795).
The direction of the market today will be influenced by uncertainties arising out of the Crimean referendum Sunday on whether to be governed by Russia, as well as by the West’s reaction next week if it does go that route. There is little doubt it will.
A bounce today should find resistance starting at DJIA:16,168 (S&P 500: 1,853).
PEACE TALKS: In a news whipsaw market associate with an international crisis, there are always rumors (or reality) of “peace talks.” These trigger an immediate and sharp rally with the usual result – nothing comes of it – CAREFUL !
Meanwhile gold stocks are stirring (see below –“Gold in times…”)
Investor’s first read– a daily edge before the open
S&P 500: 1,846
Nasdaq Comp.: 4,260
Russell 2000: 1,176
Friday, March 14, 2014, 2014 12:36 p.m.
What if the softness in the economy isn’t weather related ?
We won’t know that for a month, but a meaningful break in the weather stands to prompt spending at retail stores, buyers of big ticker items (autos, etc), home-buying decisions and buyers of things consumers don’t need but feel entitled to after the long winter shut-in.
Generally, spring kicks off a rebirth of spirits after depressing winter months.
The change over could be especially uplifting this year.
Obviously, part of today’s problem in the stock market is Russia and where it will make its next move. That spells uncertainty, a long-time foe of optimists.
TECHNICAL ANALYSIS EACH OF 30 DOW STOCKS:
At key junctures, I technically analyze each of the 30 Dow Jones industrials for a reasonable near-term downside and a more extreme downside, as well as a near-term upside potential. I note the price for each, add them up and divide by the DJIA divisor (0.1557159) and arrive what the DJIA would be if each of the 30 stocks hit my targets.
As of Thursday’s close I concluded a reasonable near-term downside for the DJIA was 15,900, a more severe near-term downside would be 15,625. The near-term upside would be 16,511. That’s all assuming the overall news environment doesn’t change.
Last week New York Fed president Bill Dudley said he believes severe winter weather has shaved a full percentage point off the nation’s GDP in Q1. Beyond that, Dudley is optimistic since there will be less drag from federal spending cuts, improved household finances, and corporations that are awash in cash.
Undoubtedly, a break in the winter weather will boost consumer optimism resulting in a surge of retail spending and firm stock prices.
This transition is critical. If severe winter weather scrunched economic activity, we should see a sharp rebound once warmer weather sets in. If not, we have a problem.
Manufacturing output, new orders and exports are up for the eighth consecutive month, suggesting its recovery is real, though not yet robust. Our economy has scratched and clawed its way out of a horrendous recession without help from Europe. Obviously, a recovery there stands to accelerate our recovery here.
RUSSIA – CRIMEA
There is little the “West” can do to prevent Russia from getting its way in Crimea, unless forces within Russia reacting to a flight of capital, plunge in Russian stocks and the Ruble, and rising interest rates put a leash on Mr. Putin’s power grab.
Don’t take this one too lightly, its potential for disruption in our markets may escalate. What is happening in Crimea has been orchestrated with far too much efficiency to be “locals” exercising their desire to return to their roots – Russia.
With Crimea, it’s checkmate and looks like one of a number of strategic Russian moves in a regional chess game. If internal unrest escalates in the Baltic states where one-quarter of Latvia and Estonia see themselves as Russian, the global picture worsens.
GOLD in TIMES OF INTERNATIONAL UNCERTAINTY:
InvesTech Research’s March 7 edition called attention to the fact gold prices and gold miners’ stocks are down significantly since October 2011 when it warned readers gold prices were “bubblish”and the bullion and stocks should be avoided. InvesTech incurred the wrath of gold bug subscribers, but was proven prescient when gold nosedived.
After a devastating 36% plunge, InvesTech thinks the group deserves a close look, adding Market Vectors Gold Miners ETF (GDX) to its Model Fund Portfolio and commenting favorably on Barrick Gold Corp. (ABX) .
GDX closed Thursday at $27.03 (52-week range of $35.58 – $20.24) and ABX at $20.79 (52-week range of $29.83 – $13.43).
Both stocks have moved up since my “Gold Due for a Play ?” post on Tuesday March 11, when GDX was $25.97 and ABX at $19.75.
If a civil war breaks out in Ukraine and unrest in the Baltics surfaces, gold could get a big play from depressed levels.
The economic calendar is light this week.
For detailed analysis of both the U.S. and Foreign economies along with charts, go to www.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.”
No major economic reports
NFIB Small Business Optimum Ix (7:30 a.m.): Weak sales expectations pulled the index down 2.7 points in February to 91.4.
ICSC Goldman Store Sales (7:45 a.m.): Rebounded in the Mar. 8 week by 1.3% vs. the prior week. Year/year is at a plus 2.1% rate.
JOLTS (Job Openings/Labor Turnover 10:00): There were 4.0 million job openings in Jan. unchanged from Dec. with a hires rate of 3.3 pct. and separations rate of 3.2 pct.
Wholesale Trade (10:00): Weather-related shipping delays caused a 0.6 pct. jump in Jan. inventories and a 1.9 pct. drop in sales, driving the stock to sales ratio up to 1.20, the highest reading of the recovery.
MBA Purchase Apps (7:00 a.m.): Mar. 7 week index was down 1.0 pct., refi’s down 3.0 pct. Year/year rate down 17.0 pct. The 30-year loan for conforming balances ($417,000 or less) was up 5 basis points ti 4.52 pct.
Treasury Budget (2:00 p.m.)
Jobless Claims (8:30): Declined 9,000 for week Mar 8.
Retail Sales (8:30): Up 0.3 pct. Feb. after declining 0.6 pct. in Jan.
Import/Export Prices (8:30): Import prices up 0.9 pct. in Feb. but that includes a 4.4% weather-related jump in oil prices and a 22.4% increase in natural gas. Excluding fuel, import prices were down 0.2 pct.
Bloomberg Consumer Comfort Ix. (9:45)
Business Inventories (10:00): Rose 0.4 pct. Jan. vs. 0.6 pct drop in sales. Inventory/sales ratio is now 1.32 up from 1.30.
Consumer Sentiment (9:55):
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
Mar 6 DJIA 16, 360 Selective – Stock Pickers’ Market
Mar 7 DJIA 16,421 Pivotal Day in the Market
Mar 10 DJIA 16,452 Important Test for the Bulls Today
Mar 11 DJIA 16,418 Gold Due For a Play ?
Mar 12 DJIA 16,351 Crimea – How Big A Negative for Stocks ?
Mar 13 DJIA 16,340 Correction to Set Up An Opportunity
“Investor’s first read – an edge before the open”
*InvesTech Research – 406-862-7777 (www.investech.com) Truly one of the finest monthly market letters with a host of accurate economic and stock market indicators.
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.