I believe the best buys occur when stock prices cross down past the “ouch” point en route to the “I can’t stand it anymore point” where the last thing distraught investors want to do is buy stocks.
We may get one of those in coming weeks, the crux of my Sept. 20 post, “Raise Cash For October Opportunity.”
We will see efforts to end the shutdown, but what concerns me much more is the potential for a snowballing selling panic as the deadline for raising the nation’s debt ceiling, currently pegged at October 17, approaches.
Right now, the Street assumes this crisis isn’t anything to worry about, after all there have been more than 72 debt ceiling increases since 1962 without default.
But with divisions in Congress never as wide since the Civil War, there is a chance the deadline will be missed.
While the Treasury will likely come up with “an out” if the deadline is missed, investors won’t know that until it is announced.
Washington governs by crisis, I see no reason for that to be different this time around, especially this time.
Expect a “news whipsaw” to dominate price action. News of a proposal to end the shutdown, even avert a default will surface almost daily, and they will be rejected by one side or the other, with rallies and plunges in stock prices whipsawing investors who trying to get on the right of the market.
I view rallies as suspicious, expecting ugliness in Washington and the stock market to worsen in coming days with the odds of the debt ceiling deadline to be breached for the first time in our nation’s history.
Investor’s first read– an edge before the open
S&P 500: 1,695
Russell 2000: 1.087
Wednesday, Oct. 2, 2013 (9:16 a.m.)
TECHNICAL OBSERVATION – STOCKS: NEW FORMAT
I am streamlining this format in order to include more stocks.
The following are observations based solely on technical analysis and don’t give consideration to fundamentals or changes in brokerage ratings, earnings guidance/projections, breaking news, which can have an immediate impact on stocks, justified or not. The object here is to sense forces of supply and demand for the stock which affect support and resistance levels frequently.
These are not buy or sell recommendations, and are not stocks I have recommended.
STOCKS OF GENERAL INTEREST:
Note: Currently, there is the potential for sharp moves in stocks in response to developments in Washington. Under these conditions, support/resistance levels are especially suspect.
I have added a “debt ceiling crisis” risk level for each stock, a price where these stocks could drop to if the debt ceiling decision goes down to the wire and fear escalates.
Apple (AAPL: $487.96) Positive.
Carl Ichan’s comments pressuring management to undertake a big stock buy-back drove it higher yesterday ending a five-day correction and paving the way for a move across $500 (Congress permitting).
Debt ceiling crisis risk: $465
Facebook (FB: $50.42) Positive.
Consolidating 10-day up-move with resistance at $51. Support is $49.80. FB has doubled since July.
Debt ceiling crisis risk: $46.50
IBM (IBM: $186.38)Positive. As expected a buyer entered slightly below $185 with its stock ending close to its high for the day. Once past $187, IBM heads for $188- $189. Support now $186. Debt ceiling crisis risk: $175
Pulte Homes (PHM: $16.67) Positive.
Needs to hold above $16.50. Needs high volume push across $17.50 to reinforce its positive status. Guess here is it will do that.
Debt ceiling crisis risk: $12.80
First Solar (FSLR:$42.14) Positive, up from neutral with move across $42.
Big move secured a base formation and potential to work its way up to $43 - $45
Debt ceiling crisis risk: $37.20
Target (TGT: $63.91)Negative.
Struggling in a sloppy base formation after two so-so days. Support is $63.67 and that is iffy. Needs big buyer, which can happen if economy gains traction.
Debt ceiling crisis risk: $59.60.
Hewlett-Packard (HPQ: $21.31) Negative.
Finally a good day in a sloppy base formation.
Really needs some institutional support – positive research report – aggressive bargain hunter ( if justified). Break below $21 suggests drop to $19.
Debt ceiling crisis risk: $17.90
EBAY (EBAY: $55.79)Positive.
Three day pause about to launch move across $57. Support $55.70.
Debt ceiling crisis risk: $54.60
Amazon (AMZN: $320.95) Positive.
No longer consolidating its August - September gain. Move across $320 indicates potential for near-term move to $325 - $330.
Debt ceiling crisis risk: $303.
STOCKS SHOWING ATTRACTIVE or UGLY TECHNICAL PATTERNS
ALSO NEW: This is intended to call attention to unusual technical activity. Will not be followed daily. I plan to introduce this feature in the near future, even hoped to do so today, but opting for a better time in light of a high risk environment associated with the possible shutdown and debt ceiling crisis.
(NOTE:I do not own, nor am I short AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.)
ECONOMIC REPORTS: Another key week for reports on the economy.
The big news will be on jobs with the ADP report coming Wednesday and Employment Situation report coming Friday before the market opens.
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com - www.mam.econoday.com
Chicago PMI (9:45) PROJ.: Index 54.4 for Sept. vs. 53.0 Aug.
Dallas Fed Mfg. Ix.:(10:30) PROJ.: Index for Sept. 6.0 vs. 5.0 for Aug.
ICSC Goldman Store Sales (7:45) was up 0.2 pct. for the 9/28 week.
Gallup US ECI (8:30): An Economic Confidence Index encompassing what the economy is doing now and what it is perceived to be doing in future.
PMI Mfg. Ix.: (8:58) Ix. for final Sept. reading was 52.8 unchanged
ISM Mfg. Ix. (10:00) Sept. Ix jumped to 56.2 from. 55.7 Aug.
Construction Spending(10:00) Delayed due to shutdown. Aug. +0.4 pct. vs. +0.6 pct. Jly.
ADP Employment Report (8:15) PROJ.: Private payrolls Sept. 180,000
Fed’s Bernanke Speaks (3:00)
Jobless Claims (8:30) PROJ.: For week 9/28: 313,000
Bloomberg Consumer Comfort Ix. (9:45)
Factory Orders (10:00) PROJ.: Aug. +0.3pct. vs. drop of 0.3 pct. Jly.
ISM Non-Mfg. Ix. (10:00) PROJ.: Sept Index 57.0 vs. 58.6 in Aug.
Fed’s Fisher speaks (12:30)
Fed’s Powell speaks (12:45)
Employment Situation (8:30) PROJ.:Sept. 184,000 vs. 169,000 Aug., Unemployment 7.3 pct.
Fed’s Kocherlakota speaks (1:45)
RECENT POSTS: 2013
Sep 16 DJIA 15,376 “No Taper ! No Summers ! Selling Opportunity ?
Sep 17 DJIA 15,494 “No Taper= Rally Followed By a Sell off ?
Sep 18 DJIA 15, 529 “Sell the Taper Rally ?”
Sep 19 DJIA 15,676 “Raise Cash for Better Opportunities”
Sep 20 DJIA 15,636 “Raise Cash for October Opportunity”
Sep 23 DJIA 15,451 “Can a Normal Correction Become a Bigger One ?”
Sep 24 DJIA 15,401 “Opportunity Looms as Storm Clouds Form”
Sep 25 DJIA 15,384 “Brinkmanship Starts – What to Do”
Sep 26 DJIA 15,237 “Street Not Worried – Yet Should You Be ?”
Sep 27 DJIA 15,328 “Prepare for an October Buying Opportunity”
Sep 30 DJIA 15,258 “Makings of an October Buying Opportunity”
Oct 1 DJIA 15,129 “Now the Scary Part – the Debt Ceiling – Default ?”
*Stock Trader’s Almanac – New edition shortly off the press.
“Investor’s first read – an edge before the open”
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.