Analysis Projects Hi-Lo Range for DJIA

George Brooks |

   A week ago the bull market was climbing a vertical “wall of worry,” today, it’s looking for the next dragon to slay.

   Obviously, a major part of the rally that started Oct. 9 was related to the October 16,  eleventh- hour agreement to re-start the U.S. government and raise the debt ceiling without a devastating default.

   A bonus resulting from the damage of this folly is that it has taken a Fed taper off the table for several months. 

   Now all this has to be balanced by a stream of so-so Q3 earnings. The Street appears to be looking beyond these earnings to Q4, which for some reason, it believes will make better reading.

   There is no assurance the nation won’t go through this brinkmanship all over again, though odds suggest it is unlikely, since the public opinion polls indicate Americans won’t put up with it again.

TECHNICAL ANLAYSIS EACH OF 30 DOW INDUSTRIALS:

   Over the weekend, I technically analyzed each of the 30 Dow industrials seeking three results. One, is a reasonable intermediate-term high, the other two are a reasonable support level and a level that reflects the risk of a stinging correction.

   I totaled  the numbers for each column and divided by the DJIA divisor to get a projected level for the three. It’s kind of an inside-out approach, but it has worked well in the past, especially at the 2009 bear market bottom.

   I see the potential upside for DJIA  at 15,843 with support at 15,200, and  a nasty correction target of 14,631, which works out  to be 5% for the DJIA.

CONCLUSION:

   We do not have the kind of  untethered  urgency  to buy stocks, clearly not the senseless abandon that drives investors to shoot at everything that moves.

   Just like the “I can’t stand it anymore” impulse drives investors to sell at the bottom, so too will the same impulse force the long absent public to come off the sidelines to put it all into the market, mostly into small unseasoned stocks.

   That will come, but the wait may be long and  some ugly setbacks  will intervene.

I can see a rotation of leadership here, with  traders taking profits in stocks that have posted a big move in recent days and reinvesting in stocks that have yet to participate in this rally.

   TODAY:

   Friday the S&P 500 hit my upside target of 1,740, but  the DJIA fell short of my target  of 15,495.  I’m staying with that, but setting the S&P 500 at 1,756. The Nasdaq Comp. and Russell 2000 live in a different world and reflect an increasing  pressure on money managers to outperform their peers.

   With taper nowhere in sight, interest rates are down sharply, once again making stocks the only game in town.

   The drop in interest rates has run up long-term bond prices again raising risk for new buyers. Careful !

Investor’s first readan edge before the open

DJIA: 15,399

S&P 500:    1,744

Nasdaq  Comp.:  3,914

Russell 2000:  1,114

Monday, Oct. 21, 2013     (8:56 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: $508.89) Positive.

Fulfilled Friday’s  comment that AAPL can run to $509 - $510 near-term.”

Has room to run further.  Support is $506 - $508.  Some resistance is likely at $510 - $512;  Hard to tell with this one Earnings and all the whoopla that goes with it come on Oct 28.  Has a shot at $538 - $544 if market sizzles.

Facebook (FB: $54.22) Positive

Hit yesterday’s target of mid-50s early in the day then consolidated the gain which should set the stage for another move up, market permitting.  Support rises to $53.65

IBM (IBM: $174.83)  No change from yesterday’s comments, “Got crushed by earnings report.  IBM now 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.   Thursday’s “flush” should have cleared the air. Support is now $173.35 resistance $175.  While its technical pattern has abruptly turned negative, fundamentalists will be looking closely at a level that represents value. This kind of “gap” pattern is typical. Rather than trade lower and lower in response to bad news, stocks simply plunge (gap) to a level that discounts the change in fundamentals then bounces along sideways until all sellers are flushed out and   there is reason for bargain hunters to step inI may replace IBM with another stock unless I see the possibility of it slipping down to the low 160s where it would be very attractive for institutional investors  with a longer term outlook. Odds don’t favor that, but a big rebound is unlikely near-term.

Pulte Homes (PHM: $16.58)  Positive

Thursday’s break out from its 19-day “down channel”  on increased volume  set the stage for a move to $17 which it nearly hit ($16.95) Friday before  slipping back on a light-volume day.  Support is $16.50. May spend a day or two here. Earnings come on Oct. 24, maybe that’s what the Street is waiting for.

First Solar (FSLR:$49.97)  Positive

Exceeded yesterday’s target of $48.  Should encounter some resistance between $50 - $55. Nimble traders should love this stock. It swings widely within  a trading day. Support is $47.65. FSLR has had a big run since its Sept low of $35.59, and I may replace it with another stock;

Target (TGT: $64.67) Now a weak positive

Broke out from a sloppy turning pattern with potential  for $67, but will encounter selling along the way.  Support is $64.45

Hewlett-Packard (HPQ: $23.48)  Positive

Broke out of a tight  “pennant” formation last  Wednesday, with nice follow through Thursday and Friday. Nice volume spike late Friday may suggest  2-3-point move this week. Has the potential for a move to $25 - $26.

Support is $23.25

EBAY (EBAY: $51.38) Neutral

Thursday, EBAY’s stock got hammered after  its disappointing earnings and guidance for Q4 hammered the stock Thursday.  Management since backtracked a bit, noting their pessimism was overdone. As a result the stock rebounded Friday.  Resistance rises to $53.65. This was the fifth time down from the $56 - $57 area this year, each of the preceding four times it rebounded sharply.

Amazon (AMZN: $328.93) Positive

Blew out of a tight consolidation pattern and blew right past my initial target of $316 - $391. Support is $322.                                         

 

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

 

ECONOMIC REPORTS

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

MONDAY:

Fed’ Evans speaks (8J

Chicago Fed Activity Ix.(8:30) Delayed due to shutdown

Existing Home Sales (10:00)  PROJ.: Sept. 5.30 millioon rate vs. 5.48 million rate Aug.

TUESDAY:

Employment Situation (8:30) PROJ.:  Sept 185,000 vs. 169,000 Aug. Was delayed due to shutdown.

Richmond Fed Mfg. Ix.(10:00) Delayed due to shutdown

WEDNESDAY:

Import/Export Prices (8:30) PROJ.: Import +0.2 pct,  Export-0.1 pct.

FHFA House Prices (9:00) PROJ.: July y/y +8.8 pct.

THURSDAY:

Jobless Claims (8:30) PROJ.: For 10/19 335,000

PMI Mfg. Ix.(8:58)PROJ.: Oct. index was 52.7

JOLTS(10:00) PROJ.: Job Openings Labor Turnover Aug. 3.725 mil vs 3.689 July

New Home Sales(10:00) PROJ.:  Sept. 420,000-unit annual rate

Kansas City Fed. Mfg. Ix.(11:00) PROJ.”\: Delayed

FRIDAY:

Durable Goods (8:30) PROJ.: Sept.:+2.5 pct, ex-trans. +0.5 pct

Consumer Sentiment (9:55) Oct. Index 74.8 vs. 75.2 mid-month Oct.

RECENT POSTS - 2013

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 ?”

Oct 17 DJIA   15,373   “How Much of the “Deal” has the Market Discounted” ?

Oct 18 DJIA  15,371  “No More Wall of Worry for  Bull Market to Climb ?”

  George  Brooks

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

sensiblesleuth@gmail.com

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.

 

 

 

 

 

 

 

 

 

 

 

 

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