Stronger Economy – a Game Changer for Fed?
Monday, August 25 , 2014 9:14 a.m. BEFORE the OPEN
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Looks like the Street likes what Fed Chief Yellen had to say at Jackson Hole last week. She still believes the labor markets have further to heal before their economies can handle higher interest rates.
Obviously, the Street finds security in Yellen’s assurance its zero-based interest rate policy is not changing near-term, but that comfort will be short lived if the economy continues to gain traction.
Clearly, the labor market would benefit from a pickup in housing, which may be happening now. A surge in Housing Starts and the NAHB housing market index last week hints at that. New Home Sales will be announced at 10 o’clock today, house prices tomorrow, MBA mortgage purchase applications at 7 o’clock Wednesday and Pending Home Sales Thursday (see below).
TODAY:
I am still bullish, I am just wary of a correction in coming weeks, but look forward to a buying opportunity in September/October.
Today’s projected open suggests more upside before that happens, though there is risk in new buying after a 4.4%, eleven day surge.
Odds favor a move by the S&P 500 across the 2,000 level today. There is a chance the Street will see the increased buying interest caused by news media headlines as an opportunity to feed stock out.
The key today is how ell an early advance can hold. A rally failure would indicate correction is underway.
Investor’s first read– Daily edge before the open
DJIA: 17.001
S&P 500: 1,988
Nasdaq Comp.4,538
Russell 2000: 1,160
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TECHNICAL ANALYSIS OF EACH OF THE 30 DOW INDUSTRIALS (8/25)
At key junctures, I technically analyze each of the 30 Dow industrials, then using the Dow’s “divisor” convert these results back into the DJIA. I seek a near-term resistance level and a primary and secondary support level.
As of Aug 22, the near-term resistance level is 17,175; the primary support is 16,870 and secondary support is 16,724.
INTEREST RATES:On numerous occasions, I have reminded readers that stock prices can rise along with interest rates, but to a point where higher rates draw money away from stocks to bonds and where higher rates adversely impact the economy. Realistically, that point must be a lot higher than the zero-based interest rates existing today. I conceded that the stock market would take a brief hit when a move to higher rates was perceived by the Street, but stabilize before moving higher.
A recent study by Andrew Garthwaite, chief equity strategist for Credit Suisse concludes just that. Since 1977, he found the S&P 500 peaked no earlier than four months prior to the Fed’s first rate increase, but gained as much as 4 percent in the six months after the first increase. He notes, that while rate rises have increased volatility in the stock market, they did not mark the end of the bull market.
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THIS WEEK’s ECONOMIC REPORTS:
Big week for reports in all areas. 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.”
MONDAY:
Chicago Fed. Nat’l Activity (8:30)
PMI Services – flash (9:45):
New Home Sales (10:00):
Dallas Fed. Mfg, (10:30):
TUESDAY:
ICSC Goldman Stors Sales (7:45):
Durable Goods (8:30)):
FHFA House Prices (9:00):
S&P Case-Shiller (9:00):
Consumer Confidence (10:00):
Richmond Fed. Mfg.(10:00)
State Street Investor Confidence (10:00):
WEDNESDAY:
MBA Mtge Purchase Apps (7:00):
THURSDAY:
Jobless Claime (8:30):
GDP(8:30):
Coprporate Profits (8:30):
Pending Home Sales (10:00)
Kansas City Fed Mfg. Ix.(11:00):
FRIDAY:
Personal Income/Outlays(8:30):
Chicago PMI (9:45)
Consumer Sentiment (9:55)
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RECENT POSTS:
Aug. 4 DJIA 16,493 Trader’s Buy, but Risks are High.
Aug. 5 DJIA 16,569 Bulls “Must” Step In Now, or…….
Aug. 6 DJIA 16,429 Is The Economy Really Rebounding ?
Aug. 7 DJIA 16,443 Rally to Give Investors a Good Read on Near-Term
Aug. 8 DJIA 16, 368 News Whipsaw = Increased Volatility
Aug. 11 DJIA 16, 553 Rebound to Good News – How Far ?
Aug. 12 DJIA 16,569 News Whipsaw – Watch Your Back !
Aug. 13 DJIA 16,560 Rally ? Be Very Careful !
Aug. 14 DJIA 16,651 Better Off Now than in October 2007 ?
Aug. 18 DJIA 16,662 All Eyes on Fed at Jackson Hole Thursday
Aug. 19 DJIA 16,838 Increasing Speculative Fever
Aug. 20 DJIA 16, 919 Is Market Now Vulnerable to Bad News ?
Aug. 21 DJIA 16,979 S&P 2000 to Trigger Selling
Aug 22 DJIA 17,039 Will Street Sell When S&P 500 Breaks 2,000 ?
*www.agaryshilling.com
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 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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