Exit: Bernanke? QE? More Uncertainty

George Brooks |

NYSEIn spite of the light volume yesterday, all major market averages advanced. While that suggests sellers were absent, it also suggests buyers wanted to own more stocks JUST IN CASE the Fed comes up with something that sparks a further up-move.
Disappointing Housing Starts at a plus 6.8% for May vs. projections for a gain of 11.2% may have been “good” news in that it suggests the Fed has less incentive to taper their low interest rate/ bond-buying stimulus.
I hope not. Isn’t the whole idea here that the Fed’s actions are supposed to improve the economic expansion ?
Most of the Street will be better off when it gets a peep at what the Fed’s exit policy will look like. Maybe then the Street can “exit its “bad news is good news mentality.”
If the Fed does, or says, nothing new, the Street will continue to worry that at some unknown point in time, the Fed will begin an exit and will decline.
If the Fed infers it will begin an exit, however modest, the market will decline even more.
While that reaction would be sharp, I believe it would create an excellent buying opportunity.
Another “exit” is shaping up as influential – the exit of Fed chief Bernanke. If it wasn’t worrying the Street too much before now, the press and talk show pundits will ensure it does.
This is a news driven market, and it tends to punish investors who buy after sharp news-driven moves up, or sell after sharp news-driven moves down.
No matter what the Fed does today, or who replaces Bernanke, uncertainty will persist for months. That warrants caution.
At this point, I would be wary of another surge up, as I expect the saw-toothed whipsaw to continue.
Support is DJIA 15,177 (S&P 500: 1,637).

Investor’s first read – an edge before the open
DJIA: 15,318.18
S&P 500: 1,651.81
Nasdaq Comp.: 3,482.18
Russell 2000: 999.27
Wednesday, June 19, 2013 (9:01 a.m.)

Quadruple Witching Friday looms. While the expiration of stock-index futures, index options, stock options and stock futures hasn’t had a big impact on the stock market, it may this time.

Apple (AAPL: $431.54)
AAPL closed close to its low for what was a ho-hummer. This was the 6th day its daily highs were progressively lower. Without a big buyer, it is going to $420- $422, and possibly below $405. Resistance is now $432. Without breaking news that jolts the Street, or the prospect thereof, a meaningful rise is questionable.
At 10 times earnings and yielding 2.82%, AAPL is a value, but why rush to buy ?

FACEBOOK (FB - $24.21)
A surge in buying late Friday and stability yesterday, confirms FB is developing a base between $23 and $25, one that can support a recovery to the high 20s. Yesterday’s pop was met with selling, which should bring it back down to $24.

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 !
FOMC Meeting Announcement (2:00p.m.)
Fed Chief Bernanke press conf (2:30)
Jobless Claims (8:30)
PMI Mfg. Ix. (8:58)
Existing Home Sales (10:00)
Philly Fed Svy. (10:00)
Leading Indicators (10:00)
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”
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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Symbol Name Price Change % Volume
NANO Nanometrics Incorporated 20.87 0.00 0.00 72,544


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