Do I Detect Speculative Fever? If So, What Could Happen?

George Brooks |

Last Thursday Amazon (AMZN) released a favorable earnings report, but it was an upgrade by Raymond James’ Aaron Kessler to Strong Buy from Market Perform with a price target of $446 produced a 21-point gap at the open.

   That’s bull market stuff.

   That suggests speculative fever is festering. Appetites are whetted.  Institutions are beginning to panic about missing opportunities, paying up aggressively just to be on board.

   Prior to the beginning of this bull market I wrote that a bull will be signaled when the “fear of  owning stocks changes to the fear of NOT owning stocks.”

   We passed that stage years ago. What we may be seeing is an escalation of that fear – the fear of missing the BIG moves small company stocks can produce, but at a greater risk, but which investors tend to ignore until it is too late.

    Small company stocks post bigger gains early in a  bull market primarily because they are coming off severely depressed levels, it is the big-caps and mid-caps that get the biggest play. At some point, the focus rolls over to the small- and micro-caps, eventually ending is a wild speculative blow out.

   We may be on the threshold of a big run in the latter two groups.

   With the shutdown/default risk  behind us and Fed taper postponed, the final hurdle is the economic recovery. We will get a peek at its progress this week, but may need a few more weeks’ data to confirm due the impact of Washington’s folly earlier this month.  

   If  speculative fever is festering, this could get wild, but not without risk.

Investor’s first readan edge before the open

DJIA: 15,570

S&P 500:1,759

Nasdaq  Comp.3,943:

Russell 2000:  1,118

Monday, Oct. 28, 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: 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: $525.96) Positive.

Big jump last week was in anticipation of AAPL’s  intro of its newest iPad and tablet iPad Air. Friday was a day of rest.  Support is $520 - $522.  AAPL has  a shot at $538 - $544, but must now get past resistance at $528 - $529. Support is $524. Earnings come after the close today.

Facebook ($FB: $51.95) Positive

Last week was a consolidation week  which may reflect nervousness about earnings due Oct. 30.  However, this may just be a correction to its 8-day surge in early Oct.. While there has been some buying in the low 50s, FB is under some pressure and can get down to $48 - $49. Stock had a one-day reversal Friday and needs the same on the upside this week.

IBM ($IBM: $176.85)  Negative but probing for support.

A spike of buying on Friday was reversed by selling late in the day until a buyer in-size stepped in. Support is $176. Resistance in $178.

Pulte Homes ($PHM: $18.04)  Positive

Investors got  the earnings report they  were looking for last week  pushing PHM across $18.Support is now $17.75 -  $$17.80.

First Solar ($FSLR:$52.80)  Positive

Got stopped in its tracks Friday at $54,70 but should find buyers between $50.25 and $51.30.

Target (TGT: $64.07) Neutral – borderline negative.

Buying late Friday penetrated a downtrend line, improving TGT’s ugly chart pattern.  Still .needs the kind of  big buyer above $63 like it got six eight days ago.

 Hewlett-Packard (HPQ: $24)  Positive

Friday’s chart improved slightly thanks to some buying that came in late in the day. Can hit $26 near-term if  its earnings report Oct. 26 is well received.  Support is  $23.90.

EBAY (EBAY: $51.63) Neutral  and turning ugly.

EBAY needed a big-volume move  above $52.70 to reverse damage done by management’s comments about the company’s near-term prospects last week. The day started out with a surge, but it met serious selling taking the stock down shortly after the open.

   I think there is a credibility problem here as a result of management’s comments about the Holiday season. It would be a good idea if management clarifies its position if it wants to head off more selling. Support at $50.65.

Amazon (AMZN: $363.39) Positive

AMZN pleased the Street last week with its Q3 earnings report, but it was Raymond James’ Aaron Kessler’s  raising of its rating to Strong Buy from Market Perform with a price target of $446 that blew it out. Thursday’s market action suggested a strong move up, but not a “gap” of 22-points at the open. This is the kind of stuff that whets appetites. !!

I do not own, nor am I short: AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.

ECONOMIC REPORTS

  Heavy slate of reports this week, however accuracy is

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

MONDAY:

Industrial Production (9:15) Proj.: Sept. +0.4 pct.

Pending Home Sales(10:00) Proj.:Sept. zero pct.

Dallas Fed. Mfg. Ix.(10:30 Proj.:Oct. Ix at 9.0 vs.12.8 Sept.

TUESDAY:

FOMC Meeting begins

ICSC Goldman Store Sales (7:45) No proj.

Producer Price Ix.: Proj.:Sept. +0.2 pct

Retail Sales (8:30) Proj.: Sept.: zero pct.

S&P Case-Shiller Home Price Ix. (9:00) Proj.: 20 cty HPI +0.7

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

Consumer Confidence(10:00) Proj.:Oct. ix. 75 vs 79.7 Sept.

State Street Investor Confidence Ix.(10:00) Proj.:

WEDNESDAY:

ADP Employment Rpt(8:15) Proj.: Oct.: 138,000

Consumer Price Ix.(8:30) Proj.:Sept.: +0.2 pct.

FOMC Meeting announcement (2:00) No Bernanke press conf. planned

THURSDAY:

Jobless Claims (8:30) Proj.:for 10/26: 335,000

Chicago PMI (9:45) Proj.:Oct.: ix.: 55.0 vs 55.7 Aug.

FRIDAY:

Motor Vehicles Sales Proj.:Oct.domestic:11.9 mill-unit rate (total: 15.4 mil.-units)

Fed’s Bullard speaks(8:00)

PMI Mfg Ix.(8:58) Proj.: No data available

ISM Mfg. Ix.(10:00) Proj.:Oct.: ix.: 55.0 vs. 56.2

Fed’s Kocherlakota speaks(11:15)

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”

  George  Brooks

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

sensiblesleuth@gmail.com

*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

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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.

 

 

 

 

 

 

 

 

 

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

Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 119.68 0.77 0.65 17,462,220
IBM International Business Machines Corp 166.52 1.16 0.70 3,146,930
EBAY eBay Inc. 29.97 0.55 1.87 13,548,980
AAPL Apple Inc. 113.95 1.83 1.63 34,395,057
TGT Target Corporation 77.39 -0.45 -0.58 4,047,724
AMZN Amazon.com Inc. 768.66 1.33 0.17 2,470,200
FSLR First Solar Inc. 33.54 0.37 1.12 2,052,860
PHM PulteGroup Inc. 19.60 -0.25 -1.26 5,453,225
HPQ HP Inc. 15.78 -0.38 -2.35 9,865,108
AORTF Aortech Intl Plc n/a n/a n/a 0

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