Technical Rally - Easy Does It!

George Brooks |

Tuesday, October  14, 2014     9: 10 a.m.  BEFORE the OPEN

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Daily:Boiling down fundamental, technical, economic,

monetary, fiscal, psychological, and seasonal data into a quick read.

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    The legs have been cut out from under the Bull, but it can get back on its feet.  The question is, can it stay on its feet ?

    I think the Bull will survive, but an ugly correction (worse than this one) must be given serious consideration.

   The Street is hopelessly addicted to the Fed’s low interest rate policy and bond buying (pseudo) stimulus program.  It survived the announcement of  Taper in December 2013, but not without a Jan. – Feb. 7.3% correction.

    While serious negatives lurk (ISIS, Ukraine, Ebola, economic weakness abroad), the Fed has blown a lot of air in a balloon here and that is either going to have to be let out gradually or the balloon will burst.

   Better-than-expected Q3 earnings can generate some upside from here, especially after such a sharp drop in prices.

    BUT, what counts is, what will earnings be in Q4 and in 2015 ?  Chances are, revisions and guidance will be downward. That has to be discounted by a correction, which may be happening now.

TODAY:

   A “technical” bounce will greet investors at the open. It can run to DJIA 16,487; S&P 500: 1,896; Nasdaq Comp.: 4,264 before encountering headwinds.

   If the Fed hints at postponing the end of its bond buying for a considerable time due to economic weakness abroad, the market will “gap up” and challenge the September highs.  However that would likely be enough air blown into the balloon to burst it.

    I think the Fed did a good and necessary job offsetting a total meltdown in 2008-2009, but over the years it has enabled the Street to develop an addiction it can’t shake.  That’s scary !

   Without a goose by the Fed and exceptional Q3 earnings accompanied by reasonably upbeat projections for coming quarters, more work is needed before a comfort level can be reached.  Treat this like you would treat a growling dog.

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Investor’s first readDaily edge before the open

DJIA: 16,321

S&P 500:  1,874                               

Nasdaq  Comp.: 4,213

Russell 2000: 1,049

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CORRECTION??  BEAR MARKET ??

All this market assessment shouldn’t be akin to rocket science.  How about common sense. The Street says it’s a bear market if the S&P 500 drops 20%, or a correction is a “correction” if it drops 10%.

    What if the S&P drops 19.4%, or it drops 9.6% ?  Not a bear ?  Not a correction ?

If it reaches the “ouch” point, it is IMHO a correction.  If it reaches the “I can’t stand it anymore, I’m outta here,” point,  it’s a bear market. 

    I don’t think we have hit the “ouch” point, but it won’t take too much more downside to reach that level of pain.

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TECHNICAL ANALYSIS EACH of 30 DOW INDUSTRIALS   (10/10 close)

By technically analyzing each of the 30 Dow industrials then using the Dow “divisor” to convert the data back into the DJIA, I can get a better read on what is primary support and a secondary support.

  As of the 10/8 close:  Resistance 16,851; Primary Support: 16,430; and Secondary Support: 16,112.

   NOTE: These calculations generally hold for longer periods of time, but need to be changed when the market is hit with excessive volatility.

   The resistance and support levels listed daily may differ, since they are shorter term.

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INTERNATIONAL TENSIONS:

   Ukraine/Russia – quiet for now, but has the potential to get uglier.

   ISIS/Iraq/Syria – A Euro/Mid-East coalition has formed to counter ISIL. A full-blown bombing mission has been undertaken, which stands to be ongoing. Psychologically, that stands to play well in America, which has been warned of future terrorist activity.  The good possibility of a major war resulting must be considered.

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THIS WEEK’s ECONOMIC REPORTS:

    A heavy week for reports on the economy.   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.”

 

TUESDAY:

NFIB Small Bus. Optimism (7:30): Sept. index was 95.3 vs. 96.1 in Aug.

ICSC Goldman Store Sales (7:45): Down 0.7 pct. in Oct. 11 week : Year/year+3.8 pct.

WEDNESDAY:

MBA Purchase Apps/ Refi’s (7:00)

PPI-FD (8:30);

Retail Sales (8:30):

Empire State Mfg. (8:30):

Business Inventories (10:00):

THURSDAY:

Jobless Claims (8:30):

Industrial Production (9:15):

Philadelphia Fed Svy(10:00):

Housing Mkt Ix. (10:00):

FRIDAY:

Housing Starts (8:30):

Consumer Sentiment (9:55):

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RECENT POSTS:

Sept, 24  DJIA  17,055  Critical Crossroads for Money Managers

Sept. 25  DJIA  17,210  Back to Tug of War  - Bulls vs. Bears

Sept  26  DJIA  16,945  Moment of Truth for Market’s Direction

Sept. 29  DJIA  17,113  Huge Test for Bulls Today

Sept. 30  DJIA  17,071  Big Move in Market  for Winner of Tug of W ar

Oct.  1    DJIA  17,042  October – Risk or Opportunity ?

Oct.  2    DJIA  16,804  October Opportunity But Angst in Interim

Oct.  3    DJIA  16,801  Rally Today Must Hold

Oct.  6    DJIA  17,009  Best Six Months for Owning Stocks Looms

Oct.  7    DJIA  16,991  Volatility: Q3 earnings, ISIS, the Fed, Elections

Oct. 8     DJIA  16,719  Extreme Volatility = Risk, but Opportunity

Oct. 9     DJIA  16,994  Bad News is Good News ?  Pure Insanity ! 

Oct. 10   DJIA  16,544  Last Man Standing – Bear – or Bull ?

Oct. 13   DJIA 16,544   A Dangerous Rally – Dow 16,000 this Week ?

*Stock Trader’s Almanac

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.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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