SUMMARY OF MY OCT. 3, “DEBT DEAL TO MISS OCT. 17 DEADLINE”
Thursday, I indicated I believed the debt ceiling deadline set by Treasury Secretary Jack Lew at October 17 would be breached, but a deal would be reached the following weekend, the 19th and 20th. I reasoned that Treasury Secretary Lew can find ways to stretch the deadline several days without defaulting.
I noted I expected the DJIA to hit 12,760 intraday (S&P 500: 1,430) on the Friday the 19th.
In the interim, I warned of a news whipsaw market that will trigger sharp moves up in face of news that suggested an end to the hostilities in Washington, then down when hopes were dashed.
The whipsaw will be triggered by misleading reports of public meetings, speeches, private, behind the scenes meetings, rumors, statements from people who because they aren’t authorized to comment, comment anyhow, rating agencies warning of debt downgrades, and doomsters projecting doom.
DJIA 12,760 (S&P 500: 1,430) isn’t that wild, especially if it looks certain the October 17 deadline for raising the debt ceiling will be missed.
The market would be erasing 11 months of market rise and amount to a one-third retracement of the 2009 – 2013 bull market.
Common sense dictates an agreement will be reached before the October deadline, but if common sense was a guide for Congress, this would have been resolved by now without all the self-inflicted wounds.
There are reasons for laws, procedures, decorum, and reasonably predictable behavior by those who govern, not the least of which is stability.
Push it too far and you get chaos.
There are dozens of ways to measure the value of stocks and the market as a whole, with the biggie being CONFIDENCE in the present and future.
Odds favor a resolution of this standoff before it triggers a crash.
It is the reason I expected the announcement of a proposal to settle this mess over the weekend – didn’t happen.
When a crisis gets so ugly it doesn’t seem it could possibly get uglier, it doesn’t (darkness before the dawn). We are getting there, BUT BEWARE, if it becomes apparent to an unsuspecting Wall Street, we are incapable of governing, the stock market will CRASH far beyond my target.
I have been bullish since late February/early March 2009 prior to liftoff. On Sept. 19 (DJIA 15,676), my “Raise Cash for Better Opportunities,” urged readers to prepare for a correction, but it was not until last week’s “Debt Deal to Miss Oct. 17 Deadline………” and projection of a risk to DJIA 12,760 that I saw the risk of a bigger hit.
TODAY. THIS WEEK:
Expect sharp rallies to accompany proposals to end the shutdown, even with reference to averting a default this week.
While a shutdown can be resolved, the debt ceiling crisis will go down to the wire with the real “downsizing” being to everyone’s net worth.
Last week’s message was to expect a great buying opportunity Friday Oc. 18 prior to a weekend that would bring a “deal.”
So far, I hold to that.
Investor’s first read– an edge before the open
S&P 500: 1,690
Russell 2000: 1,078
Monday, Oct. 7, 2013 (9:16 a.m.)
TECHNICAL OBSERVATION – STOCKS: NEW FORMAT
I am streamlining this format in order to include more stocks.
The following are observations based solely on technical analysis and don’t give consideration to fundamentals or changes in brokerage ratings, earnings guidance/projections, breaking news, which can have an immediate impact on stocks, justified or not. These are not buy or sell recommendations, and are not stocks I have recommended.
STOCKS OF GENERAL INTEREST:
Note: Currently, there is the potential for sharp moves in stocks in response to developments in Washington. Under these conditions, support/resistance levels are suspect.
I have added a “debt ceiling crisis” risk level for each stock, a price where these stocks could drop to if the debt ceiling decision goes down to the wire and fear escalates.
Apple (AAPL: $483.03 ) Positive.
The political scene stands to disrupt the normal pattern of trading, but may offer better opportunities this month than business as usual. Market stabilized Friday with AAPL picking up from $479 though volume was light. There is risk to $470, even $462 if market starts down again this week.
Debt ceiling crisis price: $457 – $462.
Facebook (FB: $51.04 ) Positive.
Late day buying Thursday followed through on Friday with impressive rally setting the stage for the mid 50s, if the overall market permits.
Debt ceiling crisis risk: $46.50
IBM (IBM: $184.10 ) Positive IBM is still probing for a solid base which may have to come closer to $182. Stock needs big buyer to confirm double bottom and rebound to $194. Debt ceiling crisis risk: $175
Pulte Homes (PHM: $16.20 ) Positive.
Drop to $16 brought in a buyer, as well as a better market Friday. Support is $16, next resistance is $17. Still in a positive consolidation pattern. Do not want to see a break of $15.10.
Debt ceiling crisis risk: $12.80
First Solar (FSLR:$43.97) Positive
Hit $44-$45 target and can extend to $46 – $47, market permitting. Tiny bit of selling at Friday’s close. This one swings widely – two points at a time, so $42 – $43 possible before bounce. Support is $42
Debt ceiling crisis risk: $37.20
Target (TGT: $63.41 ) Negative.
Still struggling in a sloppy base formation. Seller still there. Resistance $63.70, Support: unimpressive at $63.10. Needs big buyer, which can happen if economy gains traction. What is the message here ? Consumer temporarily tapped out ?
Debt ceiling crisis risk: $59.60.
Hewlett-Packard (HPQ: $21.26 ) Negative.
Yesterday was better, but low volume suggests not a game changer, but so was the market. May break below $21. Really needs some institutional support – positive research report – aggressive bargain hunter ( if justified). Great bargains usually don’t just sit there letting big buyers in to buy all they want without moving the price up. Break below $21 suggests drop to $19.
Debt ceiling crisis risk: $17.90
EBAY (EBAY: $55.58 ) Positive.
Friday, I wrote, this is one of those markets where resistance levels are spot on, but support levels break down – not a good sign. With a strong stock like this, one should pick a point below the market for a potential buy. Resistance is now $57
Debt ceiling crisis level now $51.
Amazon (AMZN: $ 319.04) Positive.
Rebound impressive after Thursday’s rally failure, attesting to the strength of AMZN which in a good market looks a lot higher. Debt ceiling crisis risk: $303.
(NOTE:I do not own, nor am I short AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.)
ECONOMIC REPORTS: A light reporting week shaping up. Some reports will be delayed due to shutdown, though Federal Reserve based reports and private sector reports won’t. The economy is not currently center stage, though the deadlock in Washington will hurt the economy and confidence and business decisions going forward.
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
Consumer Credit (3:00) PROJ.: Aug. +12.9 billion
NFIB Small Business Optimism Ix.(7:30) PROJ.: Index Sept. 93.5 vs. 94.0 Aug.
International Trade (8:30) PROJ.: Aug. -$40.0 billion
JOLTS (10:00) Jobs Opening and Labor Turnover Svy: PROJ.: Aug. 3.725 million vs. 3.689 July.
Fed’s Pianalto speaks (12:25)
Fed’s Plosser speaks (12:30)
Wholesale Trade (10:00) PROJ.: Aug. + 0.4 pct
Jobless Claims (8:30) PROJ.: week ended 10/5 310,000- vs. 308,000 prior week
Import/export Prices (8:30) PROJ.: Sept. +0.2 pct. vs +0.1 pct Jly.
Fed’s Bullard speaks (9:45)
Treasury Budget (2:00)
Fed’s Williams speaks (2:30)
Producer Price Ix. (8:30) PROJ.: Sept. +0.2 pct vs. +0.3 pct Aug.
Retail Sales (8:30) PROJ.: zero gain Sept. vs. 0.2 pct gain Aug.
Consumer Sentiment (9;35) PROJ.: Index Sept. 75.0 vs final Aug. 82.1
Business Inventories (10:00) PROJ.: Aug. +0.2 pct.
Sep 20 DJIA 15,636 “Raise Cash for October Opportunity”
Sep 23 DJIA 15,451 “Can a Normal Correction Become a Bigger One ?”
Sep 24 DJIA 15,401 “Opportunity Looms as Storm Clouds Form”
Sep 25 DJIA 15,384 “Brinkmanship Starts – What to Do”
Sep 26 DJIA 15,237 “Street Not Worried – Yet Should You Be ?”
Sep 27 DJIA 15,328 “Prepare for an October Buying Opportunity”
Sep 30 DJIA 15,258 “Makings of an October Buying Opportunity”
Oct 1 DJIA 15,129 “Now the Scary Part – the Debt Ceiling – Default ?”
Oct 2 DJIA 15,191 “Potential for a Deadline to be Breached”
Oct 3 DJIA 15,133 “Debt Deal to Miss Oct.17 Deadline – Settle Over the
Weekend – DJIA Bottoms Oct 19, 12,760 (intraday)”
Oct 4 DJIA 15,133 “Weekend Proposal on Shutdown – a Head Fake ?”
“Investor’s first read – an edge before the open”