Monday, August 4, 2014 9:18 a.m. BEFORE the OPEN
Last week’s 3.6% crunch did some technical damage and rattled some cages on the Street. We should see an attempt to recoup some ground lost early this week, but there will be some sellers along the way.
The S&P 500 had a 14.6% run since early February before its 1,991 peak on July 24. A one-third correction would take it down to 1,906, a one-half correction to 1,864.
Absent new negatives, the risk at this point looks somewhere between the two, or 1,885.
Using the April 11 to July 24 rise as a base, the risk comes out to about the same number – 1,885.
A number of outside factors accounted for last week’s plunge – Russia, Israel/Hammas, Argentina, Europe’s economy, and interest rate jitters.
While we have seen worse negatives, the upside here is limited without some consolidation and churning.
Bear in mind, minor corrections of 3% to 5% can become an uglier correction if the market gets hit by new negatives at that juncture where a minor correction is beginning to yield to a rebound.
TODAY:
Yes, the put-call ratio is signaling a buying opportunity, and that be fine for nimble traders. I have a feeling we are looking at a sideways trading range, quite possibly with a downward bias heading into the fall. This market cannot handle another major uncertainty/negative without giving more ground.
Failure of the market to gain traction after 20 minutes of trading today would suggest another plunge below DJIA 16,400 (S&P 500: 1,914; Nasdaq Comp.: 4,325).
Resistance todayis DJIA: 16,596; S&P 500: 1,937; Nasdaq Comp.:4,381.
Investor’s first read– Daily edge before the open
DJIA: 16,493
S&P 500: 1,925
Nasdaq Comp.:4,352
Russell 2000: 1,114
THE FED:
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.
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.
Along the same lines, Dallas Fed President, Richard W. Fisher recently indicated the economy was getting significantly closer to “liftoff,” suggesting to me and obviously others, that interest rates may rise sooner than expected. Based on various projections that could be Q1 or early Q1.
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TECHNICAL ANALYSIS of 30 DOW JONES INDUSTRIALS
(UPDATED ANALYSIS: July 31 AFTER the 312 POINT PLUNGE in the DJIA)
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.
After yesterday’s crunch, Iran my analysis based on the July 31 closeand concluded the near-term upside for the DJIA is now 16,912, a reasonable downside from here is 16,290 and more extended downside risk to 15,960.
Note: My daily support/resistance levels are more short-term oriented
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THIS WEEK’s ECONOMIC REPORTS:
The economic report schedule is heavy this week with a good balance between housing, service, production and employment
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:
Gallup U.S. Consumer spending Measure (8:30);
TUESDAY:
ICSC Goldman Store Sales (7:45):
PMI Services. Ix. (9:45):
Factory Orders (10:00):
ISM Non- Mfg Ix. (10:00):
Global Composite PMI (11:00):
WEDNESDAY:
MBA Purchase App (7:00):
Int’l Trade (8:30):
THURSDAY:
Jobless Claims (8:30):
Consumer Credit (3:00):
FRIDAY:
Productivity/Costs (8:30);
Wholesale Trade (10:00):
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RECENT POSTS:
July 22 DJIA 17,051 Significance of Yellen’s Warning
July 23 DJIA 17,086 Feeding Frenzy in Low-Priced Stocks Imminent ?
July 24 DJIA 17, 113 Taper’s End Fully Discounted – 2015 Interest Rates Not
July 25 DJIA 17,083 Is Market Action Setting Stage for a Leg Up ?
July 28 DJIA 17,960 Big Week – Economic Reports/Q2 Earnings
July 29 DJIA 16,982 Quite Before the Storm ?
July 30 DJIA 16,912 Market on the Verge of Big Move ?
July 31 DJIA 16,880 Huge Test for Bulls
Aug. 1 DJIA 16,563 False Alarm, or ………
*I use intraday prices
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.
