Significance of Yellen's Warning

George Brooks |

TuesdayJuly  22, 2014      9:12 a.m.  BEFORE the OPEN

SUMMARY:

    Since June, I have been expecting the market to enter a sideways trading range as it digests the summer doldrums and apparent negatives that always show up to rein in a frosty market (Fed Chair Janet Yellen’s comments about stretched valuations in biotech and social media stocks, the downing of  the Malaysia Airline’s jet, and Israel’s incursion into Gaza).

    The most significant of the three from a stock market’s standpoint is  Yellen’s comment about stretched valuations.

    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.

    Her comments harpooned small biotech, momentum stocks and the Russell 2000, though more than likely just created a buying opportunity.

    Parallels to Fed Chief Alan Greenspan’s 1996 “irrational exuberance” – dot-com comments were immediately drawn, but rejected when the Street realized  the bubble didn’t burst until January 2001 four years later.

    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.

TODAY:

    Pre-market trading suggests a run this week at recent highs for the DJIA 17,151.56, S&P 500: 1,985.59, Nasdaq Comp. 4,485.92.

    A rally failure where the averages give up all of a day’s gain would suggest new highs will have to wait.

    Like the relentless pink rabbit, this bull just defies bad news and gravity. The bears are not sleeping at night, the bulls quite possibly are gaining momentum from Q2 earnings reports which so far are beating projections handily. 

    The key for higher prices here will be corporate guidance and projections through year-end.

Investor’s first readDaily edge before the open

DJIA:  17.051

S&P 500: 1,973

Nasdaq  Comp.:4,424 

Russell 2000:   1,146

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TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS

(UPDATED ANALYSIS:  July 21)

    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.

     I ran my analysis again following the Monday, July 21 close and concluded the near-term upside for the DJIA is 17,333 a  reasonable downside is 16,932 and more downside 16,865.

    My analysis run last week July 1 projected near-term resistance for the DJIA at 17,109 where it stalled last week.  

Note: My daily support/resistance  levels are more short-term oriented.

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THIS WEEK’s 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.”

MONDAY:

Chicago Fed Nat’l Activity Ix. (8:30): June’s index slipped to 0.12  from 0.21, reflecting  a zero reading in June’s  production component.

TUESDAY:

ICSC Goldman Store Sales (7:45): Dropped 0.4 pct. in July 19 week from prior week’s gain of 0.4 pct.

Consumer Price Ix. (8:30): June CPI up 0.3 pct vs May’s increase of 0.4 pct.

FHFA House Price Ix. (9:00):

Existing Home Sales (10:00):

Richmond Fed Mfg Ix. (10:00):

WEDNESDAY:

MBA Purchase Apps (7:00):

THURSDAY:

Jobless Claims (8:30):
PMI Mfg. Flash Ix. (9:45):

New Home Sales (10:00):

Kansas City Fed Mfg. Ix. (11:00):

FRIDAY:

Durable Goods (8:30):

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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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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