It looks like the Street is tip-toeing through a minefield. Institutions would love to buy aggressively, but must be careful. This S&P 500 is ahead 163% since it was launched on March 6, 2009 and 71% since the October 4 correction low. While there have been three sharp corrections in the past year, another is possible if the earnings outlook begins to turn sour.
To its credit, this bull has engaged just about every obstacle imaginable and endured. That pattern can breed euphoria and indifference to risk. It is important investors bear that in mind if this market begins to soar. Always protect positions from unexpected adverse developments.
The six months between November 1 and May 1 have earned the distinction of being the “Best six months for owning stocks”*
It looks like the market jumped the gun this year as it did in 2010 and 2011. Last year it got liftoff on Nov. 16. Based purely technical analysis the upside has the potential to reach DJIA 16,600 by May 2014
Wednesday, I alerted readers to the likelihood of a consolidation/correction, that a 6.8%, ten-day rise in the S&P 500 justified a break. The jump was both in anticipation and the actual news of a re-start of the government and avoidance od a U.S. selective default in its obligation.
Yesterday I wrote that the DJIA must break out above 15,400 and S&P 500 above 1,750 to reverse a correction.
The S&P 500 reached my target, the DJIA fell short. The jury is still out.
The market is marching to the Q3 earnings drumbeat now, but especially to projections and guidance for Q4 and 2014.
Based on yesterday’s market action, it acts like it is headed higher. So far, the open looks mixed. Under these conditions, if the Street was thinking SELL, it would be headed sharply lower in pre-market trading.
Investor’s first read– an edge before the open
S&P 500: 1,752
Russell 2000: 1,118
Friday, Oct. 25, 2013 (8:56 a.m.)
STOCKS OF GENERAL INTEREST: I am considering the elimination of this section and offering it in a separate publication on a subscription basis.
I would be able to cover more companies, and would not be constrained by a pre-market deadline. Comments welcome: [email protected]. Include opinion about how you think I could even improve commentary bearing in mind these are NOT buy/sell comments.
The following are based on technical analysis only and are not to be taken as buy or sell recommendations, but as 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. Technical analysis is based on one’s interpretation of the impact buying and selling have on the price of a stock and is therefore not an exact science. News and events can change an interpretation instantly.
Apple (AAPL: $531.91) Positive.
Big jump Monday was in anticipation of AAPL’s intro of its newest iPad and tablet iPad Air. Yesterday, AAPL broke through resistance at $526 and $528, and now has a shot at $538 – $544 if market sizzles. Support is $529 – $530.
Facebook (FB: $52.44) Positive
Took a day off Monday and then gave ground Tuesday and Wednesday, but firmed up yesterday. Market action this week reflect nervousness about earnings due Oct. 30, however this may just be a correction to its 8-day surge in early Oct.. New support is $52.25, that’s not cast in stone. FB appeared to have a buyer late yesterday.
IBM (IBM: $177.80) Negative but probing for support.
Got some more buying yesterday. Volume was not huge, but was enough to move the stock. However, IBM needs a stronger commitment to turn the corner. It hasn’t been this low since Q4 of 2011, which may be a turn-on for someone with a crystal ball.
Pulte Homes (PHM: $17.85) Positive
Produced the earnings report the Street was looking for with a move over $18, before settling back.Support now $17.60
First Solar (FSLR:$54.22) Positive
Monday’s surge was triggered by a JP Morgan recommendation, and possibly by panicky short covering. Looks ready to run again. Stock can hit May high of $59, and could go higher if shorts are squeezed to the “ouch” point. Support is $53.90.
Target (TGT: $64.13) Neutral – borderline negative.
Market action Wednesday and yesterday weakened TGT’s technical pattern. TGT needs the kind of big buyer above $63 like it got six days ago.
Hewlett-Packard (HPQ: $23.88) Positive.
Can hit $26 near-term if its earnings report Oct. 26 cooperates. Support is $23 – $23.80.
EBAY (EBAY: $52.34) Neutral
Still licking its wounds from last Thursday’s earnings report. There is confusion here, small thanks to management’s poor handling of guidance. Needs a big-volume move above $52.70 to reverse damage done by the report. Yesterday’s action suggests that may be happening now. Support at $52 vulnerable.
Amazon (AMZN: $332.21) Positive
Consolidation is yielding to buying pressure. Move across $340 possible nere-term.
I do not own, nor am I short: AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
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 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 ?”
Oct 21 DJIA 15,399 “ Analysis Projects High-Low Range for DJIA”
Oct 22 DJIA 15,392 “Is the Stock Market Vulnerable ?”
Oct 23 DJIA 15,467 “Q3 Earnings – Only Worry In Town ?”
Oct 24 DJIA 15,413 “No Fed Taper in Sight ? Don’t Bet on It.”
“Investor’s first read – an edge before the open”
*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
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.