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Breakout or Fakeout? Syria/Fed Taper

The next 7 trading days should answer some questions.  Congress returns today, President Obama addresses the Syria issue on TV tomorrow night after a Senate vote, and the FOMC announces a

The next 7 trading days should answer some questions.  Congress returns today, President Obama addresses the Syria issue on TV tomorrow night after a Senate vote, and the FOMC announces a decision on the taper-now-or taper-later issue a week from Wednesday.

   The DJIA and S&P 500 traced out an impressive enough base in late August/early September in the DJIA 14,760 (S&P 500: 1,627 area to support a further rally.

   I am surprised the market hasn’t probed lower as a precaution to a worse-than-expected outcome in Syria, the Fed taper and  more Washington gridlock.


   The technical pattern is upbeat, but untested.  A breakout-fake out here is a 40-60 possibility, which suggests investors should proceed  with caution.  I would feel better if the market was trading lower in face of  universal concern.

   I am not convinced the markets have discounted a new Fed chief in January and the  implications of a final taper sometime next year.  So far, it’s been all about the first taper.

   Near-term resistance is DJIA: 14,983 (S&P 500: 1,663)

   Near-term support is  DJIA: 14,883 (S&P 500: 1,650)

   Investor’s first readan edge before the open

DJIA:  14,922

S&P 500:  1,655

Nasdaq  Comp. 3,660

Russell 2000:  1,029

Monday, Sept. 9,  2013     (9:13)


The Fed hasn’t handled this taper thing well.  Imagine the board of directors of a corporation deliberating over a decision that will affect its stock price and operations in a big way and the directors hitting the speech trail over and over again with opinions that vary, leading its shareholders and prospective investors to first conclude it would vote one way, then in a week or so conclude it will vote the other way.

   How does one make a rational decision ? How much money is lost in the process ?

   This is too much transparency.

   The Fed has indicated it would accommodate the economy, tapering out of QE if the economy gains enough traction, holding fast if it doesn’t.

   Small wonder the Street is confused and addicted to QE.  The Street would be better off  if  the Fed officials didn’t comment beyond the accommodation statement.

  Through its inconsistency it has caused interest rates to jump sharply, putting the homebuilding recovery at risk.  While mortgage rates are not insufferably high, the jump following Fed chief Bernanke’s June 19  taper-by-fall and wrap up by mid-2014  jolted the markets. To make matters worse, a host of Fed officials followed his comments up with a denial that taper wasn’t the same as tightening, reversing a market that was dropping in search of a level that discounted taper consequences.

   I am basically a Fed supporter, and think it did a good job when the world was in meltdown.  The “taper isn’t tightening” message should have been started a year ago.  


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: $498.22) 

Note: Bottom was targeted at $385 for the turn around  Apr. and Jun. 2013 (double bottom). continue to follow

Pattern: Positive

Resistance:  breakout across $510 possible

Support:  $496  –  Buyers – above $490

Facebook (FB – $43.95)

Note: Bottom was targeted below $18 for a turnaround Sept. 2012.  Continue to follow.

Pattern: Positive –

Resistance: $44.75

Support: $43.25

Recent strength attributed to Sun Trust Robinson Humphrey’s increase ib price target to #55 from $40.

  IBM ($183.03)  No change

Note: Started coverage  Aug. 7, 2013 after big plunge in stock

Pattern: Negative, but improving.

Resistance:  $183.50  – got hit yesterday by a seller at resistance $184.50  Still a seller there – buyer backed off – test of $181.50 – $182 likely.                                   

Support:   Be aware that IBM has ranged four times up and down between $185 and $215 over the last two years.

  PulteGroup (PHM- $15.47 ) 

Note: Started coverage Aug. 12, 2013

Pattern: Neutral again after ugly trend

Resistance: $15.60

Support:  $15.25  Needs big buyer to counter industry negatives that resurfaced with the jump in mortgage rates

First Solar (FSLR:$37.45 )

Note: Started coverage: Aug.: 22, 2013

Pattern: Negative , slight signs of improvement

Resistance: $38.50

Support: $36.50

Thursday morning, I said $36  must hold or a drop to $31 – $32 , but that there was some evidence of bargain hunting. Buyers struck in-size at the open and continued to buy throughout the day. Friday was a different story as FSLR got whacked  by a seller.

Target (TGT: 63.29)

Note: Started coverage Aug: 22, 2013:

Pattern: Negative

Resistance: $63.65

Support: $63.15

Had a buyer every day last week, but seller showed up Friday.  Is there a message here about consumer spend ? 

Hewlett-Packard (HPQ:22.42)

Note: Started coverage Aug. 23, 2013

Pattern: Negative, but tracing out a nice base above $22

Resistance: $22.50 

HPQ looks like it can hold in this $22 – $23 area. Sharp drop from $26 created overhead supply (a lid)  $19.85 is possible but only  in a bad market.

eBay (eBay: $52.83)   Yesterday’s action positive

Note: Started coverage Aug. 28, 2013

Pattern: Neutral but improving

Resistance: $53.25

Support:  $ 52.00  May be tiring after sharp 4-day rally from a $50 area.  $53 – $54 look tough without big news.  (AMZN: $ 295.86)

Note: Started coverage Aug. 28

Pattern:  Bullish

Resistance: $298

Support:  Support now $294 

 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: –


Fed’s John Williams speaks (11:00)

Consumer Credit (3:00 p.m.)   Proj.:  $12.3 bil.


NFIB Small Bus. Optimism Ix.(7:30)   Proj.: Ix Aug. 95.0  vs. July 94.1

JOLTS (10:00)   Jobs Opening Labor Turnover Svy.  Proj.: July 9.9275 mil. vs. 3.936 mil June


Wholesale Trade (10:00)  Proj.:  July +0.3 pct  vs. June drop of 0.2 pct.


Jobless Claims (8:30)  Proj.: for 9/7/13 330,000 vs. 323,000 prior week.

Import/Export Prices (8:30)  Proj.:  Aug. +0.5 pct.


Producer Price Ix. (8:30)  Proj.:  Aug. +0.2 pct. ; Ex. food/energy: +0.1 pct.

Retail Sales (8:30)    Proj.:  Aug. +0.5 pct. ; Excl. motor veh. +0.3 pct.

Consumer Sentiment (9:55)   Proj.:  Aug Ix. 82.0 vs. mid-month 82.1

Business Inventories (10:00)  Proj.:  July +0.3 pct.



Aug 22  DJIA 14,897  “Street’s Angst Not About First Taper, but……”

Aug 23  DJIA 14,963  “Big Day: Rebound or Rally Failure ?”

Aug 26, DJIA  15,010  “Fed Policy Change – Big Impact on Stock Market ?”

Aug 27  DJIA  14,946  “No Quick Solution for Market’s Negatives – DJIA 14,250 ?

Aug 28  DJIA  14,776  “What Now for AAPL, FB, AMZN, FB, IBM, HPQ, etc. ?”

Aug 29  DJIA  14,824  “Don’t Buy the Syria Solution Rally?

Aug 30  DJIA  14,840 “ Countdown Starts Tuesday – What to Expect”

Sep 3     DJIA  14,810   “Market Up Sharply – Someone Know Something ?”

Sep 4     DJIA  14,833  “What Must Happen for the Bull to Snort”

Sep 5     DJIA  14,930  “ September Taper – Buying Opportunity ?

Sep 6     DJIA  14,937  “Market Wants to Run – Are You Ready ?”

*Stock Traders Almanac- 2014 issue  just coming off the printing press

  George  Brooks

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

[email protected]


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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