A correction has started, triggered by concern for the uncertainty and angst that will accompany the prospect of a government shutdown in coming weeks, probably one reason the Fed opted “not” to taper this month.
Other negatives include, the next speed bump in the Syria solution, and our economic recovery, i.e. is retail hitting a wall ? Will the housing industry rebound now that interest rates have slipped lower ?
While we will get a host of housing industry reports this week, the numbers won’t reflect the interest rate drop triggered by the Fed’s decision last week not to begin taper.
CONCLUSION:
This bull market has further to go, but is vulnerable to an 8% to 12% correction, which could persist for months. The big contributors to that would be continued gridlock in Washington and a retail-based slump in the economy.
Moderate corrections come and go, but the bigger ones often develop when a moderate correction (3% – 5%) turns into a bigger one as a result of new negatives that hit the market when it is down but ready to rebound.
By way of its decision not to begin to taper out of QE this month, interest rates have retraced some of the sharp gain posted after Fed chief Bernanke’s commentary on June 19 about taper starting this fall and ending in mid-2014.
That slide may be short-lived as we move into October when the debate surrounding the raising of the debt ceiling hits full stride and the FOMC announces it next decision on taper on the 30th.
Any rally here should encounter resistance at DJIA 15,495 (S&P 500: 1,714)
Risk today is DJIA15,380 (S&P 500: 1,702).
Investor’s first read– an edge before the open
DJIA: 15,451
S&P 500: 1,709
Nasdaq Comp. 3,774
Russell 2000: 1,072
Monday, Sept. 23, 2013 (9:16 a.m.)
TECHNICAL OBSERVATION – STOCKS:
The following are observations based solely on technical analysis and don’t give consideration to fundamentals or changes in brokerage ratings which can have an immediate impact on stocks, justified or not. The idea here is to give readers insight into the likely trends and turns in the stock’s price, short-and long-term.
I picked up on AAPL and FB last year when they were in a tailspin, and picked up on IBM, Pulte, First Solar, Target, and Hewlett-Packard recently for the same reason. These are not buy or sell recommendations, and are not stocks I have recommended.
NOTE: Expect support and resistance levels to change more frequently under adverse and uncertain conditions like those we are experiencing presently..
WARNING: This market is highly “news sensitive,” with everything at the present negative. Any break for the better in the mid-East, taper, or in the threat of a government shutdown in October will trigger a rally, especially in stocks below, since they have been hammered already.
Resistance/support levelsare “tight” and more easily penetrated than if I gave readers “general” resi/spt levels.
Apple(AAPL: $467.41 )
Note: Bottom was targeted at $385 for the turn around Apr. and Jun. 2013 (double bottom). I continue to follow
Pattern: Now neutral down from bearish.
Resistance: $498 Up sharply before the open.
Support: Rises to $466, but $457 possible in weak market. Icahn a nuisance to management but good news for investors.
The Motley Fool investment letter attributes AAPL’s problem to : “Since their introduction, both the iPhone and iPad have been the best products at the best price points….In the last year, the market has shifted. Now Apple’s products appear to be overpriced compared to their rivals and they aren’t necessarily better.” Clearly a case where management has decided to play “prevent defense,” ie. try not to lose a dominant position. You have to play the game that got you there !
Facebook (FB – $47.49)
Note: Bottom was targeted below $18 for a turnaround Sept. 2012. Continue to follow.
Pattern: Positive
Resistance: $49.90
Support: $46.60
Recent strength attributed to Sun Trust Robinson Humphrey’s increase in price target to $55 from $40. Broke out of consolidation Friday on good volume.
IBM ($190.02)
Note: Started coverage Aug. 7, 2013 after big plunge in stock
Pattern: Positive but correvting nice August – September move
Resistance: $191.30 The $194 – $196 area should be tough to penetrate
Support: $188.15
Be aware that IBM has ranged four times up and down between $185 and $215 over the last two years.
PulteGroup (PHM- $17.12)
Note: Started coverage Aug. 12, 2013
Pattern: Positive but Taper decision could move it sharply one way or another
Resistance: $17.45
Support: $16.80 Buyers – watch momentary dip below $17.00 followed by a bounce.
Big beneficiary of the Fed
First Solar (FSLR: $39.02)
Note: Started coverage: Aug.: 22, 2013
Pattern: Neutral – basing – improved yesterday but so did others.
Resistance: $40.25
Support: $38.65 Nice up channel. Break below $37.60 bad news
Target (TGT: $64.55)
Note: Started coverage Aug: 22, 2013:
Pattern: Needs to stabilize after yesterday’s return to its base from resistance level.
Resistance: $64.30 Still basing, but must hold above $63.50. Retail could be the harpoon for a pick up in the traction of the economy. I sense something not right out there.
Support: $65 Nice base forming
Hewlett-Packard (HPQ: $21.22)
Note: Started coverage Aug. 23, 2013
Pattern: Negative –
Resistance: $21.35
Support: $20.25 Not sure what problem is here. Street must be looking at downward revisions in earnings. Look for a swift disjointed drop below $20, possibly to $18.75 – $19.30 followed by a sharp bounce. All that assuming no horrendous problems..
Bears seeming to be driving a nail here one fraction of an inch down with each smite.
eBay (eBay: $54.95)
Note: Started coverage Aug. 28, 2013
Pattern: Positive – on a roll
Resistance: $56 – $57 in a decent market
Support: $ 54.30
Amazon.com (AMZN: $316.34)
Note: Started coverage Aug. 28
Pattern: Bullish , but correcting September up move.
Resistance: $319 Ran into a little selling Friday. Breakout to $325 possible with help from overall market
Support: Support now $312. Bad market tests $306
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. Of note, are reports on the housing industry (see below). Interest rates have dropped following the Fed’s decision “not” to taper this month, but we need a few weeks to see if that triggers a resurgence in home buying and refinancing.
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
MONDAY:
Chicago Nat’l Activity Ix. (8:30) No proj.
PMI Mfg. Ix. (8:58) PROJ.: Sept. Ix. 54.0 vs. 53.1 end of Aug.
Fed’s Lockhart speaks (9:20)
Fed’s Dudley speaks (9:30)
Fed’ Fisher speaks (1:30)
TUESDAY:
Fed’s Pianalto speaks(8:30)
FHFA House Price Ix. (9:00) PROJ.: July +0.7 pct. vs. +0.8 pct. May
S&P Case-Shiller House Price (9:00) PROJ.: July +0.8 pct. vs. pct. June. Year/year + 12.4 pct.
Consumer Confidence (10:00) PROJ.: Sept. Ix. 80.0 vs. Aug. 81.8
Richmond Fed Mfg. Ix. (10:00) PROJ.: Sept. Ix. 10.5
State Street Investor Confidence Ix.(10:00) PROJ.: No proj.
WEDNESDAY:
Durable Goods (8:30) PROJ.: Aug. -0.5 pct. vs. – 7.4 pct July, New orders Aug. +0.1 pct.
New Home Sales (10:00) PROJ.: Aug. 425,000 units annual rate vs. 394,000 July
THURSDAY:
Jobless Claims (8:30) PROJ.: 330,000 for 9/21 vs. 294,000 prior week– distorted by reporting problems
GDP (8:30) Third estimate Q 2 PROJ.: +2.7% annual rate
Corporate Profits (8:30) PROJ.: No proj.
Pending Home Sales (10:00) PROJ.: Aug. -1.0 pct. vs. -1.3 pct July
Fed’s Stein speaks (10:10)
Kansas City Fed Mfg. Ix.(11:00) PROJ.: Sept. Ix. 9.0
Fed’s Kocherlakoda speaks (12:15)
Fed’s George speaks (9:15)
FRIDAY:Fed’s Evans speaks (5:45 am)
Personal Income and Outlays (8:30) PROJ.: Aug. +0.4 pct. vs. +0.1 pct. July
Fed’s Rosengran speaks (8:30)
Consumer Sentiment (9:55) PROJ.: Sept. Ix. 78.0
Fed’s Dudley speaks (3:00 pm)
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”
Note: The DJIA may be impacted more with the replacement of Bank of America (BAC), Hewlett Packard (HPQ), and Alcoa by Goldman-Sachs (GS), Visa (V), and Nike (NKE). While the change isn’t effective until the morning of trading Sept. 23, the trading by index funds associated with these changes may distort the averages.
*Stock Trader’s Almanac – 2014 issue just off the press.
George Brooks
“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.
Read Next
