Double Header: Fed Comments/Economic Reports

George Brooks |

The focus is squarely on the Fed, and on economic reports that may influence Fed policy making.
   It is obvious the Street wants the Fed to continue its policy of low interest rates and economic stimulation.  Soft or bad economic reports are welcomed, since they ensure the Fed will stay the course. Strong reports give the Fed a reason to back away from its policy (tapering).
   We get a double header this week – the FOMC* meeting and press conference by Fed. Chair Bernanke at 2:30 Wednesday, as well as  a host of economic reports (see below).  For openers, the Empire State Manufacturing Survey for June beat expectations with a 7.84% jump vs. a drop of 1.43% in May.
  This all happens at a time bulls and bears are jockeying for control of the direction of the market.
   An breakout above resistance at DJIA 15,300 (S&P 500: 1,648) gives the market a shot at the May intraday highs (DJIA: 15,542,  S&P 500: 1,687).
  A downside breakout, below DJIA 14,950 (S&P 500: 1,608) could be the beginning of another leg down.
  BUT……..I really think we are in a “news whipsaw” where the market swings widely in both directions in  face of  changing expectations of when the Fed will begin to change its policy.
   It only takes comments by a Fed official or a  big-name institution to impact stock prices until someone counters with the opposite point of view.
   Really, if the economy and investment markets can’t handle a tiny Fed “exit” and modest increase in interest rates down the line, we have problems that call for a big drop in the stock market.  We aren’t going from single digit to double digit interest rates.
   At some point, the Street will conclude that the Fed has thought this thing through, that its exit (tapering) will be seamless and good news will once again be just that – good news.
CONCLUSION:
   Stock-index futures suggest a  strong open for the market today, most likely in expectation that the Fed is not planning a near-term change in policy.  What would help would be clarification of what its exit plan will look like.  That may temper fears of a sharp jump in interest rates.
   That is what is needed here. If the Fed delivers on that, the market’s volatility will yield to more stability.
   Without clarification, we will see more saw-toothed market action.Resistance starts at DJIA 15,178 (S&P 500: 1,639).
Investor’s first read – an edge before the open
DJIA:  15,070.18
S&P 500:  1,626.73
Nasdaq  Comp.:  3,423.55
Russell 2000:  981.38
Monday, June 17, 2013         (9:04 a.m.)

 Apple (AAPL: $430.05)
Thursday’s technical picture was improved as AAPL rebounded along with the overall market.  Friday, its picture  deteriorated along with a down market as it tested the $428 Thursday low.
   Breaking that, AAPL is most likely going down to $423. Resistance is now $436.
FACEBOOK (FB - $23.63)
A surge in buying late in the day, confirms FB is developing a base between $23 and $25, one that  can support a recovery to the high 20s.                                                                                                                                                                                                                          


ECONOMY:
We have an important schedule for economic reports this week. For access to information including charts and graphics go to www.mam.econoday.com .  Great site !
MONDAY:
Empire State Mfg Svy (8:30)
TUESDAY:
FOMC Meeting Begins
ICSC-Goldman Store Sales (7:45)
Consumer Price Ix. (8:30)
Housing Starts (8:30)
WEDNESDAY:
FOMC Meeting Announcement (2:00p.m.)
Fed Chief Bernanke press conf (2:30)
THURSDAY:
Jobless Claims (8:30)
PMI Mfg. Ix. (8:58)
Existing Home Sales (10:00)
Philly Fed Svy. (10:00)
Leading Indicators (10:00)
FRIDAY:
Quadruple Witching Friday when contracts for stock-index futures, stock-index options, stock options, and single stock futures expire.
*FOMC:P Federal Open Market Committee:  12 voting members, 7 from the Fed. Res. Board, 5 from the 12 F.R. Banks.
Tasks: Oversee open market operations (buying and selling  U.S. Treasury securities); make key decisions on interest rates and money supply.   Establish a target level for  federal funds rate (rate commercial banks charge between themselves for overnight loans between institutions that have surplus balances and those that don’t.
 George  Brooks
“Investor’s first read – an edge before the open”
sensiblesleuth@gmail.com
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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.

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