Bulls Hold the Edge, But What About Interest Rates?

George Brooks |

NOTE: Changes to :Tech Watch” – Nike, Polaris, Pandora in, Target, eBay out

   The bulls won the shootout yesterday, but it wasn’t a blow-out. The DJIA and S&P 500 exceeded  my trigger point for a lower market, near-term, but did not close below it.

   If the bulls want to keep the ball, they must move the market averages decisively past DJIA: 15,670 (S&P 500: 1,770.

   The big blues are on solid ground, but a number of highly regarded secondary leaders have taken a nasty hit, so this may be a private party as the Street opts for higher quality. .

   I’muneasy about the behavior of interest rates as reflected in the market action of the CBOE 10-Year Note Yield Index (TNX) and iShares 20+ Year T-Bond ETF (TLT).  The former moves in the same direction as interest rates, the latter in  the opposite direction.  Both indicate rates are edging up.

   Is that because an earlier Fed taper is suspected ?  If not, why are  these instruments indicating higher rates ?

TODAY:

The DJIA, S&P 500 and Nasdaq Composite all closed yesterday close to the highs for the day – that’s positive.

   What’s more, pre-market trading indicates higher prices at the open. There is enough reason to be wary of getting in too deep, but the monstrous buying power of institutions is hard to shut off.  Sellers of stock must then either sit on cash or re-invest in stocks. If they opt for stocks, there is no depletion of potential buying power until they move to the sidelines for good.

CONCLUSION:

   I see enough reason to be cautious, but the individual stock charts tell me there are pockets of strength and the potential for a rebound in stocks that have been hit in recent weeks.

   This is where technical analysis can be helpful.  Not a flawless tool, it can detect strength and weakness, primarily because the balance between buyers and sellers is so often reflected in the behavior of stocks.

Investor’s first reada daily edge before the open

DJIA: 15,618

S&P 500: 1,762

Nasdaq  Comp. 3,939

Russell 2000: 1,103

Wednesday, Nov. 6, 2013     (9:01 a.m.)

   TECH WATCH:   Changes: Adding Nike (NKE), Polaris Industries (PII) and  Pandora (P) and dropping Target (TGT) and eBay (EBAY).

   I am considering the elimination of the Tech Watch 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: sensiblesleuth@gmail.com. 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: $525.44) Positive.

No change. Remains in consolidation. Must break up through $528 to give it a shot at $540 and above. Friday, I said odds favored a slip to $514 - $518 first. It did that, hitting $515.84 before rebounding to $520. This is what a consolidation looks like – a lot of volatility reflecting profit taking and new investors who see the dips that selling produces as an opportunity to move in. I can see a slip to $510 - $512 in a soft market, but odds do not favor that, without an ugly surprise. Today: support $523.60 - $524.  Resistance $526.60

Facebook (FB: $50.10) Positive

Found a buyer and should now be able to top resistance at $52. Support now $49.25.

IBM (IBM: $177.85)  Negative

 I picked up on IBM since it seemed unreasonably beaten up, like AAPL when all its new best friends who made tons of money on it left it in the lurch when its growth rate slowed. I was poised to target a bottom close to $160, but so far it looks like it can base above $174. I may replace it with a more technically attractive stock, and return to it  IF it  looks like it will get a selling climax below $170.

Pulte Homes (PHM: $17.53)  Positive

As expected, PHM attracted buying interest on a slip to $17.14 yesterday, but there is a seller to deal with at $17.60.  Looks like it will take some consolidation to provide support for a move across $18 again.  While no one thinks an early taper (Dec./Jan.) is possible, there are those on the Street that think it is, and that could temper enthusiasm for housing stocks.

First Solar (FSLR:$62.12)  Positive

No change:Blowout earnings last week prompted buying and panicky short covering,  taking FSLR  above my target level which was set pretty high. Stock can go higher. Support rises to $60.20.

Nike (NKE:$77.20) Positive

Looks like a breakout across $77 good for the low $80s. Slip to $76.95 possible first.  Break above $77.35 would be the first step.

Hewlett-Packard (HPQ: $25.47)  Positive

Stock acts a lot better than my HP computer. Recent  strength was due to its $3.5 billion order from the U.S. Navy. Stock is consolidating Friday’s jump in price. Should find a buyer in this general area.. Resistance is $25.70.

Polaris Inds. (PII:132.15)  Positive

Gave back half of Monday’s $2 gain. Chance it will find a buyer a smidge below $132 today. Volume increased significantly late yesterday.  Hard to tell if a buyer used a seller to take a position or vice-versa. We should get a better read today.

 Amazon (AMZN: $358.89) Positive

No change:In an upbeat market, AMZN could move across $375. Raymond James’ Aaron Kessler’s  raised his rating to Strong Buy from Market Perform with a price target of $446.  Looks ready for a move to $364 - $366.

Pandora Media (P:$27.88) Positive.

That was sweet.  Pandora’s $2.21 jump yesterday was in response to positive news  about gains in share and active listeners in the U.S. radio market. The timing of the news was right, coming after an 11-day sideways-to-down consolidation. Stock may drop to $27.35. A high-volume break above $28.25 raises its chances of moving into the low $30s.

THE ECONOMY:

While the economic reports released this week are few in number, they are significant.   Though the accuracy of these reports may still be suspect due to the shutdown, the Street will be watching for clues about the economy’s strength, since it will influence  the timing of Fed taper.. Bernanke speaks at 3:30p.m. Friday.

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

MONDAY:

Factory Orders (10:00)  Rose1.7 pct in Sept. vs. declines of 0.1 pct Aug, 2.8 pct July

Fed’s Powell speaks (11:40)

Fed’s Rosengran speaks (4:00 p.m.)

TUESDAY:

ISM Non-Mfg.Ix. (10:00)  PROJ.: Oct. index Sept. 54.5

Fed’s Lacker speaks (12:30 p.m.)

Fed’s Williams speaks (5:10p.m.)

WEDNESDAY:

Leading Indicators (10:00)  PROJ.:  Sept. +0.7pct.

Fed’s Pianalto speaks (1:0 p.m.)

THURSDAY:

Jobless Claims (8:30)  PROJ.: For week 11/2 335,000

GDP (8:30) PROJ.: 3rd estimate  Q3 +2,0 pct. annual rate

Fed’s Stein speaks (9:10)

FRIDAY:

Employment Situation (8:30) PROJ.: October 120,000, Private payrolls: 128,000. Unemployment rate 7.3 pct.

Personal Income/Outlays (9:55)PROJ.: Sept: +0.3 pct.

Consumer Sentiment (9:55)PROJ.: Nov. index: 75.0 vs. 73.2 Oct.

Fed’s Lockhart speaks (12:00p.m.)

Fed Chief Bernanke speaks (3:30p.m.)

 

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.”

Oct 25 DJIA   15,509   “Best Six Months for Owning Stocks”

Oct 28 DJIA   15,570   “Do I Detect Speculative “Fever “ ? If So, What Can  

                                       Happen”

Oct 29 DJIA   15,568  “ When Will the Small Investor Plunge ?”

Oct 30 DJIA   15,680  “Don’t Rule Out Fed Taper by Year-End”

Oct 31 DJIA   15,618  “Easy Does It ! Market Nervous, Needs Breather”

Nov 1  DJIA   15,545  “Rally Failure, Correction to Continue ?

Nov 4  DJIA   15,615  “Room to Run – Just Ditch the Blinders”

Nov 5  DJIA   15,639  “Market Crossroads – Which Way ?

 

  George  Brooks

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

sensiblesleuth@gmail.com

*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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