SUMMARY:
The market is just hanging in there waiting for a spark to trigger a surge. No spark – no spark, no surge.
Obviously, a failure of the economy to snap back after a severe winter, would result is a nasty correction of 6% to 12%. So far, there is no indication of that happening.
(Kind of like going out to the mailbox every day looking for a check)
The housing sector must pick up if a robust recovery in the economy is to occur. For this reason, I am tracking five housing stocks (see below), expecting the group to pick up ahead of a sharp improvement in the economy.
There has been buying, but sellers are still there to prevent much appreciation.
On Friday, I called attention to a prospective “Head & Shoulders” top formation, but warned readers to be careful, that it could abort to the upside.
I also noted the same pattern did not exist in the DJIA, SP 500, and Russell 2000.
A move above 4,250 would pretty much eliminate the likelihood of a H&S top from following through on the downside, which could carry it to 3,550, however the Nasdaq would have to drop below 4,010 to put the H&S back in play.
Support today is: DJIA: 16,627; S&P 500: 1,887; Nasdaq Comp.: 4,096
Resistance today is: DJIA: 16,778; S&P 500: 1,906; Nasdaq 4,152
Warning: Just a hunch, based on “digital” encounters along the way. It would be a good idea to save to hard copy anything of value on a regular basis just in case all this digital data vanishes. Most of the important stuff is backed up, but hard copy would help in a crisis.
Investor’s first read– Daily before the open
DJIA: 16,715
S&P 500: 1,897
Nasdaq Comp.:4,130
Russell 2000: 1,121
Wednesday, May 14, 2014 9:05 a.m.
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Sell in May and Go Away ??
A popular jingle this time of the year for newsletters and journalists.
May has offered a number of timely exits, but I don’t buy the “stay away” part, clearly not until November.
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, 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:
We cannot have a robust economic recovery from the severe winter months without a rebound in housing. Such a rebound would likely be preceded by an up-move in housing industry stocks.
Trading in the following stocks has been generally upbeat in recent days, though there is still a seller out there to put a lid on attempts to run.
PARTIAL LIST :
BZH was slow out of the gate yesterday, but the other four acted positively.
Beazer Homes(BZH) Monday $19.51
PulteCorp(PHM) Monday $19.10
Toll Brothers (TOL) Monday $34.87
KB Homes(KBH) Monday: $16.27
DR Horton(DHI) Monday: $23.07
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THIS WEEK’s ECONOMIC REPORTS:
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:
NFIB Small Business Optimism (7:30):Surged 1.8 points to 95.2, highest since 2007.
ICSC Goldman Chain Store Sales(7:45): Mixed for May 10 week at minus 0.1
pct., but y/y up 3.9 pct.
Retail Sales (8:30) Rose only 0.1 pct. In April following March’s 1.5 pct. surge
Import/Export Prices (8:30): dopped 1.0 pct. Vs. increase in Mar. prices dropped
0.4 pct. In Apr. to reverse 0.4 pct. Gain in Mar. Export prices dropped
1.0 pct. Vs. increase of 1.0 pct. Mar.
Business Inventories (10:00):Rose0.4 pct. In Mar. vs. a 1.0 pct rise in sales.
Inventory/sales ratio is 1.30.
WEDNESDAY:
MBA Purchase Apps (7:00): Up 1.0 pct. In May 9 week after rise of 9.0 pct. The prior week. Refi’s rose 7.0 pct. Vs a rise of 2.0 pct the prior week.
PPI FD (8:30): Apr. up 0.5 pct. vs. rise of 0.6 pct. in Mar.
Housing Market Ix. (10:00):
THURSDAY:
CPI (8:30):
Jobless Claims (8:30):
Empire State Mfg. Ix. (8:30):
Industrial Production (9:15):
Philly Fed. Svy (9:55):
FRIDAY:
Housing Starts (8:30):
Consumer Sentiment (9:35)
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RECENT POSTS:
Apr 30, DJIA 16,535 Sell in May and Go Away ??
May 1 DJIA 16,580 Money Manager Dilemma – Plunge Now
May 2 DJIA 16,558 Big Move in the Offing ?
May 5 DJIA 16,512 Bear Calling Bulls Out
May 6 DJIA 16,530 Wild Ride to Continue
May 7 DJIA 16,401 Tech Headed For Slaughterhouse – Huge Selling Climax
Buy Looms
May 8 DJIA 16,518 Major, Major Bull/Bear Crossroads
May 9 DJIA 16,550 Head & Shoulders Top Nasdaq ?? Careful !
May 12 DJIA 16,583 Market Really Wants to Run, but…..
May 13, DJIA 16,695 Bulls in Wings – Market Needs a Spark
*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.
