Bernanke Must Clarify Exit plan

George Brooks |

Although a bit tentative ahead of Bernanke’s Wednesday speech and beginning of Q2 earnings reports, the Street is upbeat.

   For it, the best of all worlds would be if the Fed continues QE and corporate earnings increasing beyond expectations.

We should know the Fed’s answer Wednesday, but will have to wait for earnings.

   While the Street would like QE to continue, I really think it wants clarification about the Fed’s exit strategy and how it can be executed without significantly impacting the economy and stock prices.

   The Fed MUST provide that, and hopefully, Bernanke will do so Wednesday.

If he doesn’t, uncertainty will persist, as will the news whipsaw that has tormented investors trying to get on the right side of a market that is capable of a big move either way.

CONCLUSION:

There is some serious overhead supply lying in wait of a further up move in stock prices, especially between DJIA 15,320 and 15, 440 (S&P 500: 1,650 and 1,665). Support is DJIA 14,985 (S&P 500: 1,612).

SHORT-TERM SUPPORT/RESISTANCE LEVELS:

The support/resistance levels I refer to daily are short-term and designed to give upside/downside limits for the day.   While they often hold for more than a day, they change frequently depending on the market’s action and news driving it.

   I expect the market to have difficulty breaking through resistance levels where I expect risk of buying to be higher. The opposite holds true for support levels. Unless one checks the intraday high/low for the day, the fact these levels are hit is overlooked.

   I picked a resistance level of DJIA 15,245 (S&P 500 1,643) yesterday. These were well above Friday’s close. Both the Dow and S&P got there in early trading, but buying at those levels was risky short-term. These levels are intended to be most helpful in volatile, whipsaw markets where buying or selling at intraday extremes can be especially hurtful.

   Longer term resistance support levels change less frequently, but must be frequently revisited to ascertain whether changing conditions in the interim may have invalidated them.

Investor’s first read – an edge before the open

DJIA: 15,244.69

S&P 500: 1,640.46

Nasdaq Comp.: 3,484.83

Russell 2000: 1,009.25

Tuesday, July 9, 2013         (9:06 a.m.)

Apple (AAPL: $415.05)

Apple’s bounce off support at $411 requires confirmation. There is formidable supply between $418 and $422 that must be overcome. Without big news, that will take time. Meanwhile, it could slip below $410 briefly before stabilizing.

   Odds favor AAPL has seen its lows for 2013, but it has had 5 false moves since its September 2012 high of $705. Minor support is now $412. Resistance starts at $432.

FACEBOOK (FB - $24.71)

Yesterday’s action was upbeat, but there is resistance a bit below $25 that must be beat to enable FB to take on the $27 – 28 area.

ECONOMY:

The Street is now faced with a choice – Is it hoping for disappointing reports and an increase in the likelihood that the Fed won’t back away from QE soon ? Or will it hope for upbeat reports, a sign that QE has been helping. It can’t have it both ways – For access to information including charts and graphics go to www.mam.econoday.com .

TUESDAY:

NFIB Small Business Optimism Report (7:30)Proj.: 94.7 (range: 93.5 – 95.5)

Job Openings and Labor Turnover -JOLTS (10:00)   Proj for May 13: 3.8 mil

WEDNESDAY

******FOMC Minutes (2:00)

******Bernanke speaks (4:10)   !!!!!!!!

THURSDAY:

Jobless Claims (8:30) Proj. for July 6: 337,000 vs. 343,000 prior week.

Import/Export Prices (8:30) Proj.: +0.1%

FRIDAY:

Producer Prices (8:30)   Proj. for June 13: + 0.5%

Consumer Sentiment (9:55)   Proj.: July 13 84.1 vs. 84.5

George Brooks

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

 sensiblesleuth@gmail.com

……………………………………………..

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.

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. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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