SUMMARY:
Yesterday’s economic reports were upbeat with nice gains posted in Durable Goods, PMI, Consumer Confidence, the State Street Investor Confidence and Dallas Fed Manufacturing indexes. Home prices continued to rise. The only dud was the Richmond Fed Manufacturing Index.
OK, not bad, but not the huge catalyst the market needs to explode. Even so, a firm rebound in the economy stands to prop stock prices until economies here and abroad gain more traction.
The housing industry continues to be plagued by the difficulty of home buyers and builders at all levels to obtain financing.
Low interest rates have a downside. In addition to builders and business owners unable to get financing, persons living on fixed incomes are suffering from next to zero income from money market funds and CDs.
TODAY:
While the stock market’s action over the last four days has been upbeat, it will need a catalyst if it is going to advance significantly from here.
The economy can be that catalyst, but more recovery is needed than we have already seen.
More of the same suggests a sideways trading channel until fall.
Supporttoday is DJIA: 16,619; S&P 500:1,902; Nasdaq Comp.:4,216
Resistancetoday is :DJIA: 16,712; S&P 500: 1,916, Nasdaq Comp. : 4,246
Investor’s first read– Daily edge before the open
DJIA: 16,675
S&P 500: 1,911
Nasdaq Comp.:4,237
Russell 2000: 1,142
Wednesday, May 28, 2014 8:55 a.m.
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NOTE: I continue to run “Sell in May” and “Housing” for two reasons. One, this unds andanalysis is relevant and I add important content frequently. I get new readers, and I want them to have access to this insight.
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Sell in May and Go Away ?? stock market has ranged sideways
A popular jingle this time of the year for newsletters and journalistsMay has offered a number of timely exits, but I don’t buy the “stay away” part, clearly not until November.
Based on Friday’s market action, it looks like my contrariness is being rewarded.
Essentially, it is the backend of the “Best Six Months”* to own stocks (November 1 to May 1). Obviously, the message here is of thConsumer Confidence, the State Street e two six month periods, May to November is the worst for stocks.
This is true, but as I have noted with the Best Six Months, a lot can happen in the interim.
This bromide can’t be taken as a “given.” Of the 26 years I studied a “top” occurred in May on 10 occasions ranging from May 1 to May22. Two occurred in June and two in July. No meaningful top occurred in 12 of the years studied.
On far too many occasions over the last 26 years a May top was followed by a decline, but within months (well before Nov. 1) the market rallied sharply. I see it more as a trading opportunity – i.e. “Sell in May,” but be ready to buy back after a plunge.
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HOUSING:
The economy needs a contribution from the housing sector if it is going to gain major traction coming out of the winter slump.
April’s 1.3% jump in Existing Home Sales may suggest a recovery in housing is near. The jump comes going up against a weak March, but total housing inventory rose 16.8% to 2.29 million homes for sale. Bank lending will remain a problem.
Even so, housing stocks got a big boost Friday from the news and are beginning to show positive chart patterns. There was no follow-through Tuesday except for PHM. All others closed at their day’s low.
PARTIAL LIST :
Beazer Homes(BZH) $19.48
PulteCorp(PHM) : $19.80
Toll Brothers (TOL): $35.64
KB Homes(KBH): : $16.58
DR Horton(DHI) : $23.13
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THIS WEEK’s ECONOMIC REPORTS:
This is a big week for economic news. If it indicates the economy is charging out of its winter slump, money managers can expect to ramp up buying, assuming the outlook for corporate earnings will improve.
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
Durable Goods (8:30): Increased 0.8 pct. in April vs. +3.6 pct (revised up from 2.6 pct. Projections were for drop of 0.8 pct. Ex-transports gain was 0.1 pct.
FHFA House Price (9:00): A gain of 0.7 pct in Mar. vs. 0.6 pct. gain Feb.. Year/year for Mar. was +6.4 pct.
S&P Case Shiller Home Prices (9:00): 20-city index more than projected at +1.2 pct. vs.0.8 pct. Year/year was +12.4 pct.
NOTE: The major difference between FHFA and Case Shiller is FHFA covers 13 more states and includes many more small towns as well as refi appraisals.
PMI Svcs flash (9:45): Jumped to 58.4 in May from 54.2 in Apr.
Consumer Confidence (10:00):Remained firm at 83.0 up from81.7 (revised)
Richmond Fed Mfg. Svy (10:00): Flat in May at 7.
State Street Investors Confidence Ix.(10:00) Remains strong at 119.5 in May vs. 119.0 in Mar..
Dallas Fed Mfg. Svy(10:30): Increased to 11.7 from 4.9
WEDNESDAY:
MBA Purchase Apps (7:00): Flat for the May 23 week, refi’s likewise
ICSC Goldman Store Sales(7:45): Down 1.2 pct. for the May 24 week (+2.1 pct. y/y)
THURSDAY:
GDP (8:30):
Jobless Claims (8:30):
Corporate Profits (8:30):
Pending Home Sales (10:00):
FRIDAY:
Personal Income (8:30):
Chicago PMI (9:45):
Consumer Sentiment (9:55):
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RECENT POSTS:
May 13, DJIA 16,695 Bulls in Wings – Market Needs a Spark
May 14 DJIA 16, 715 What Could Spark a Surge or Plunge
May 15 DJIA 16,613 Market Needs Help from Economy, or…
May 16 DJIA 16,446 Bulls Blinked – But Don’t Get Too Bearish
May 19 DJIA 16,491 Stock Market Getting Ready for a Move ?
May 20 DJIA 16,511 Bull Still Alive
May 21 DJIA 16,374 Market Needs Help from Fed and Economy
May 22 DJIA 16,533 Again – Stock Market Set for a Big Move
May 27 DJIA 16,606 Market to Key on Week’s Economic Reports
*Bloomberg
**Stock Trader’s Almanac
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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