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How Much of the "Deal" has the Market Discounted?

By  +Follow October 17, 2013 6:23AM
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Phew, that was close. The question now is, how much of the “deal” has the market discounted  ?

   With ideological differences in Congress and the President so vast, I expected a decision on the debt ceiling and government shutdown to go beyond the October 17 deadline into the weekend, but without default. I expected a sell off on October 19 after the deadline was missed which I viewed as a big buying opportunity.

    The Street saw  it differently  with a six-day 4.5% surge in the DJIA prior to an 11th hour “deal” on the debt limit/shutdown.

    The downside of a short-term deal is the possibility this  brinkmanship will raise its ugly head all over again. The upside it the fact public opinion polls indicate the public is fed up with governing by crisis.

   This nonsense has had to adversely impact consumer and business confidence, and the stock market  now needs to sift through the ashes for a reason to go higher without a correction/consolidation.

   One doesn’t have to look far for examples of  risk.  Stocks of both IBM and EBAY were hammered after the Street was stunned by earnings reports released last night.

TODAY:

   The DJIA will be negatively impacted  today by a 14-point drop in IBM’s stock , which  will lop off  more than 80 points from the average.

   Market needs to digest the impact of the debt ceiling/shutdown crisis and dig in its heels for  ugly Q3 earnings reports.

   Support is DJIA 15,245 (S&P 500: 1,709). Resistance: 15,465 (S&P 500: 1,730).

Investor’s first readan edge before the open

DJIA: 15,373

S&P 500:    1,721

Nasdaq  Comp.:  3,839

Russell 2000:  1,092

Thursday, Oct. 17, 2013     (9:16 a.m.)

STOCKS OF GENERAL INTEREST:

   The following are based on technical analysis only and  are not to be taken as buy or sell recommendations, but one of many factors that must be considered in the decision process. Comments do not take into consideration earnings reports or changes in institutional ratings, company guidance.

Apple (AAPL: $501.114) Positive.

Running into resistance at $502.  Seller probably believed a big
“up” day was a good time to take something of the table. Given a stable market, AAPL can run to $509 - $510 near-term..  Support is $496 - $498.

Facebook (FB: $51.13) Positive

Rising out of consolidation phase. Mid 50s likely.  Support $49,65.

IBM (IBM: $184.66)  Note: traded below $173 in pre-market trading as a result of reporting disappointing earnings after the close yesterday.  As a result, IBM  is now technically negative. Obviously the report came as a surprise to the Street, the stock had risen  five out of the last six days before the report. IBM is down from a March high of $215.  While its technical pattern has abruptly turned negative, fundamentalists will be looking closely at a level that represents value.

Pulte Homes (PHM: $1602)  Positive

PHM started  to break out of its 19-day “down channel” yesterday on increased volume with a near-term  possibility of $17 - $17.60. An attempt to sell off in late day trading was met with buying.  There is a little resistance at $16.09. Support is $15.95.

First Solar (FSLR:$43.75)  Positive

Nimble traders should love this stock. It swings widely within  a trading day. One of those stocks a trader can stick in a “wild” bid followed by an order the same day a point or two higher. Stock must crack resistance at $45.80 to give it a shot at $48. Support is $44.75.

Target (TGT: $63.90) Neutral, but trying to turn the corner.

Retail in general is  in question now and TGT is hearing footsteps.  Has had buyers in recent days, but  needs a push across $64 to improve the pattern.

Hewlett-Packard (HPQ: $23.28)  Positive

Broke out of a tight  “pennant” formation with a shot at$25 - $26.

Support is $23.25

EBAY (EBAY: $53.97) Negative after  disappointing earnings and guidance hammered the stock in  after-market trading. It is trading at $50 in pre-market trading today and  will have to probe for support in the high 40s.  As with IBM, it is obvious, the Street was caught by surprise by the report.

Amazon (AMZN: $310.49) Positive

Support $309.  Break above $311 raises chance of move to $316.

 

I do not own, nor am I short: AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.

 

ECONOMIC REPORTS:  No fewer than eight Federal Reserve officials speak this week during a  light reporting week shaping up. Some reports will be delayed due to shutdown, though Federal Reserve based reports and private sector reports won’t. The economy is not currently center stage, though the deadlock in Washington will hurt the economy and confidence and business decisions going forward.

   For a detailed account of past and current economic reports, including charts go to: mam.econoday.com - www.mam.econoday.com

THURSDAY:

Fed’s Fisher speaks (7:45)

Housing Starts (8:30) PROJ>: 0.913 million unit rate vs. Aug. rate of 0.891 million

Jobless Claims (8:30)Distorted due to shutdown  PROJ: 10/12: 330,000

Industrial Production (9:15)  Delayed due to shutdown

Philly Fed Svy (10:00)  PROJ.: 15.0 Oct.   vs  22.3 Sept. vs. 9.3 Aug.

Fed’s Evans speaks (12:45 p.m.)

Fed’s George speaks (1:45 p.m.)

FRIDAY:

Leading Indicators (10:00)

Fed’s Evans speaks(2:00 p.m)

Fed’s Stein speaks (4:30 p.m.)

 

Sep 30  DJIA   15,258  “Makings of an October Buying Opportunity”

Oct  1   DJIA   15,129  “Now the Scary Part – the Debt Ceiling – Default ?”

Oct  2   DJIA   15,191  “Potential for a Deadline to  be Breached”

Oct  3   DJIA  15,133   “Debt Deal to Miss Oct.17 Deadline – Settle Over the

                                      Weekend – DJIA  Bottoms Oct 18,  12,760 (intraday)”

Oct 4   DJIA   14,996   “Weekend Proposal on Shutdown – a Head Fake ?”

Oct 7   DJIA   14, 936  “DJIA 12,760  if Oct. 17 Deadline Missed”

Oct 8   DJIA   14,936   “Don’t Chase This Week’s Rally

Oct 9   DJIA   14,776   “Don’t Buy A Debt Ceiling Solution Rally”

Oct 10 DJIA   14,802  “A Very, Very Dangerous Rally”

Oct 11 DJIA   15,126  “News Whipsaw Can Roil Stock Prices in Coming Days”

Oct 14 DJIA   15,237  “Fear of Default Returns – Trader Alert”

Oct 15 DJIA   15,301  “What If We Default ?  What If We Don’t ?

Oct 16 DJIA   15,168  “Market Saying “Deal” – A High Risk Bet ?”

  George  Brooks

“Investor’s first read – an edge before the open”

This email address is being protected from spambots. You need JavaScript enabled to view it.

NOTE:  STOCK TRADERS ALMANAC: The new annual Stock Trader’s Almanac  is off the press.  This is a “must,” always has been, if you are a serious  investor, or intend to be a serious investor. Visit stocktradersalmanac.com for details

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The writer of  Investor’s first read, George Brooks,  is not 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. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk. Brooks may buy or sell stocks referred to herein.

 

 

 

 

 

 

 

 

 

 

 

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.


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By  +Follow October 17, 2013 6:23AM
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