Presently, the market will be marching to Q1 earnings reports and resulting revisions in guidance and estimated for Q2 and beyond – white knuckle time for some.
TECH STOCKS:
Tech stocks advanced again yesterday but can be expected to hit resistance in coming days. Obviously, some of the hurried buying in the Techs has been the covering of short sales.
For example, resistance should start for Apple (AAPL: $531.70) at $538, Amazon (AMZN: $329.32) at $343, Facebook (FB: $63.03) at $64.80, Amgen (AMGN: $119.30) at $123.00), Netflix (NFLX: $372.90) at $396. If there were sellers at those levels in recent days, they may have more stock to let go. Google (GOOG: $534.81) needs a big buyer or it will test the $500 level, probably touch down at $506.
TODAY:
Resistance starts: DJIA: 16,554, S&P 500: 1,884, Nasdaq Comp.: 4,170
Minor support is DJIA: 16,465, S&P 500: 1,871, Nasdaq Comp.: 4,129.
Any attempt to go down today should be watched closely. Buyers should be waiting to jump in. If not, this rally which started six days ago is suspect.
Odds favor the bulls, barring unexpected news out of Russia.
I hold to my belief that the market will surge in April well into May before a correction sets in, but a spring rebound in the economy out of a weather-beaten economy is a must to sustain a rise.
The stock market has consistently hit a wall in May, primarily since it marks the end of the Best Six Months for owning stocks.*
Investor’s first read – Daily before the open
DJIA: 16,514
S&P 500: 1,879
Nasdaq Comp.:4,161
Russell 2000: 1,155
Wednesday, Apri1 23, 2014 9:14 a.m.
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NEW Study: TECHNICAL ANALYSIS OF THE 30 DOW STOCKS
At key junctures, I technically analyze each of the 30 Dow stocks seeking a reasonable near-term downside risk, a more severe risk, and an upside potential for each, then use the Dow “divisor” to convert that data back into the DJIA.
Currently, a reasonable risk based on present circumstances is DJIA 16,265, a more severe risk is 15,974 and the upside is 16,648.
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SELL in MAY, and Go Away ?
NONSENSE! SELL IN MAY and STAY for one or more trading opportunities before November 1.
You will soon read about that seasonal phenom in the press and newsletters. Essentially, it is the backend of the “Best Six Months”* to own stocks (November 1 to May 1). Obviously, the message here is of the two six month periods, it 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.
Studies like this have to have a cut-off date, but are really intended to be accepted with an open mind, i.e. as May 1 approaches, move closer to the exit mentally, and be ready to lock in some profits and raise some cash.
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RUSSIA/UKRAINE
Russia’s annexation of Crimea was only the first step in President Putin’s power grab. Undoubtedly, he plans to stir additional unrest in sections of Ukraine where Russian speaking people are in great numbers. A military response by Ukraine would give him reason to invade Ukraine to protect pro-Russians and that would have an impact on global markets, which are vulnerable to begin with.
One of the factors that turns a normal market correction of 3% to 5% into a much bigger correction (5% to 12%) is new negatives that hit the market when it is about to rebound from the 5% correction. A sharp escalation in the Russia/Ukraine situation could be one of those factors. Yesterday, the U.S. announced it was sending 600 soldiers to Poland as a sign of support.
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EUROPEAN ECONOMIES:
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 the pace of our recovery here.
The IMF released its latest global economic forecast as it meets in Washington this week. It sets global economic growth at 3.6% in 2014 and 3.9% for 2015, up from 3% in 2013.
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HOUSING STOCKS – A spring rebound in the economy can hardly occur without a renewal of interest in housing stocks. A big jump in mortgage apps and refi’s for the April 11 week suggested a rebound may be in the offing, as did a 2.8% jump in March Housing Starts. Those hopes were dashed by a 3.0% drop in apps for the April 18 week and a 4.0% drop in refi’s. New Home Sales will be announced at 10 o’clock today. TUESDAY: An attempt to rally early in the day ran into sellers, probably in response to the poor Existing Home Sales report. Relatively heavy volume came in late trading. It’s possible a buyer showed to clean up the selling, or thee stocks are headed lower. Mortgage apps for the April 18 week reported today disappointed .
PARTIAL LIST:
Beazer Homes (BZH) Friday: $18.90 off 26% from its 52-week high
PulteCorp ($PHM) Friday: $18.67 off 23.5% from its 52-week high
Toll Brothers (TOL) Friday: $34.29 off 15.1% from its 52-week high
KB Homes (KBH) Friday: $16.54 off 33.8% from its 52-week high
DR Horton (DHI) Friday $21.84 off 22.2% from its 52-week high
CONCLUSION: This group is still a good read on the potential for the economy to rebound. Good relative strength vs. the overall market would be bullish for both the industry and economy. The latter needs strength in housing to rebound significantly, since so many products key on decisions to buy a house.
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THIS WEEK’s ECONOMIC REPORTS:
Four housing market reports are scheduled for release this week two Tuesday and two Wednesday (See below). The Mortgage Bankers Purchase Apps at 7 o’clock Wednesday morning is the most time-sensitive and a possible alert to the direction of home buyer interest.
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 Ix. (8:30): Index for Mar. was 0.20 vs. 0.53 for Feb.
Leading Indicators (10:00): Up sharply in Mar. With better-than-expected increase of 0.8 pct. vs upwardly revised increase of 0.5 pct. in Feb. and 0.2 pct in Jan.
TUESDAY:
ICSC-Goldman Store Sales (7:45): Up 0.4 pct. for the Apr. 17 week vs. a drop of 0.3 pct the prior week.
FHFA House Price Ix.(9:00): Increased 0.6 pct. in Feb. vs. a gain of 0.3 pct. in Jan..
Existing Home Sales (10:00): Still no activity, down 0.2 pct. in Mar. vs. a drop of 0.4 pct in Feb. Year/year were down 7.5 Pct.
Richmond Fed Mfg. Ix. (10:00): Feb. index up to7 vs. minus 7 in Jan. and minus 6 in Dec.
MBA Purchase Apps (7:00): Apps declined 3.0% in the Apr. 18 week, refi’s dropped 4.0%.
PMI Mfg. Ix. (9:45):
New Home Sales (10:00):
THURSDAY:
Jobless Claims (8:30):
Durable Goods (8:30):
Kansas City Fed Mfg. Ix.(11:00):
FRIDAY:
PMI Services Flash (9:45):
Consumer Sentiment (9:55):
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RECENT POSTS:
Apr 8 DJIA 16, 245 Buying Opportunity Possible Early Monday
Apr 9 DJIA 16,256 April Opportunity Looms
Apr 10 DJIA 16,437 Swing Factor: Q1 Earnings, Spring Rebound
Apr 11 DJIA 16,170 Computer Selling = Scary Plunge = Opportunity
Apr 14 DJIA 16,026 Spring Surge Still in the Cards
Apr 15 DJIA 16,173 Selling Climax Still to Come ?
Apr 16 DJIA 16,262 Reversal – the Start of the Spring Surge ?
Apr 17 DJIA 16,424 Beware – Earnings Distortion
Apr 21 DJIA 16,408 A Very Important Week for Stocks
Apr 22 DJIA 16,449 Stock Market – Coiling Spring ?
*Stock Trader’s Almanac
A Game-On Analysis, LLC publication
George Brooks
“Investor’s first read – an 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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