TODAY:
Odds favor a spike up as taper is now off the fret list and the third estimate for GDP is 4.1 pct. (ann. Rate) vs. a second est. of 3.6 pct., suggesting the economy is beginning to gain traction.
We are still faced with tax selling and profit taking, but new buying is beginning to take hold. The DJIA has a chance to move up to 16,297 (S&P 500: 1,803). If selling pressure is going to intervene, it should hit between 10 o’clock and 11 o’clock in which case the downside risk is DJIA 16,060 (S&P 500: 1,796)
DON”T TAKE YOUR FOCUS OFF THE MARKET
Again, a warning. December’s trading is marred by crosscurrents – Institutional portfolio changes, tax selling, etc. The year’s best performers are likely to droop in price and losers droop even more in December.
What’s worse, the season is intense with activity – shopping, parties at work and home, travel, festivities. Serious investors with a list of buy candidates cannot be distracted at risk of missing a buying opportunity.
My “Timing Opportunity Stocks” list below is a good example, since many were hit by profit taking or were bumping along in limbo after good performances in 2013.
Suddenly, many jumped sharply in recent days: Apple (AAPL), Facebook (FB),Pulte (PHM), First Solar (FSLR), Nike (NKE),Hewlett Packard (HPQ), Polaris (PII), Amazon (AMZN), Pandora (P). As long as stocks like these were sitting there, investors felt there was no rush to buy.
Christmas is on a Wednesday. That means investors will be distracted before and after, offering astute investors an opportunity to sneak in and buy stocks before others return to the market.
One other point. A number of 2013’s losers will become so depressed from tax selling this time of the year they will offer great short-term, “hit and run” trades once to selling pressure eases and they snap back to a more reasonable level. You’ll find these on the new 52-week lows list.*
Investor’s first read– a daily edge before the open
DJIA: 16,179
S&P 500: 1,804
Nasdaq Comp.4,058
Russell 2000: 1,125
THE FED:
Janet Yellen’s Senate confirmation vote as Chair of the Federal Reserve vote has been delayed in face of Republican opposition until January 6. This may be just another chess play or the beginning of a new problem.
Now that the first taper has been announced, . the Fed is expected to wrap up QE in measured steps at a $10 billion clip over the next seven sessions, but would alter its withdrawal if the economy falters.
While taper is a change in Fed policy away from stimulation, the Fed insists it is not tightening, since it plans to hold interest rates down throughout 2014.
BEST SIX MONTHS TO OWN STOCKS:
Over the years the Stock Trader’s Almanac* has expounded on its significant finding that the stock market performs better between November 1 and May 1 than between May 1 and November 1.
The Almanac’s “Best Six” goes back to 1950. The six months is a snapshot between November and May. Many major market advances often start before November, but the point made here is the period between fall and May is where the action is.
IS THIS GOING TO BE A “BEST SIX MONTHS ?
The six months between November 1 and May 1, have consistently outperformed the six months between May 1 and November 1.*
With a 3.6% rise in the DJIA since October 31, the Street is now wondering if the market is off to yet another “Best Six Months.” Out of the last 25 years, Nov.1 to May 1, have produced 19 up-years, 3 flats and 3 downers. The best years averaged gains of 11.8% with the best up 25.6% (1998 – 1999).
THE DANGER: over the last 25 years, there have been 14 corrections ranging between 6% and 16% during this November1 to May1 period. Seven of those started in January, two in December and four in February.
TIMING – OPPORTUNITY STOCKS New addition planned: alert to stocks with emerging technical patterns with potential. In a prolonged downturn, I would alert readers to stocks with vulnerable patterns. All on the drawing board.
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: $544.46) Positive. (ALERT)
Sell off yesterday following Wednesday’s surge in the market should find support above $541. Some resistance at $550, probably year-end profit-takers. Yes, of course, every investor and non-investor knows about Apple. It is hard to accept that 2014 will have a number of good moments for stocks without AAPL racking up some big gains. Institutions must be watching this correction for an entry point.
Facebook (FB:$55.05) Positive
May have run into some profit-taking yesterday, nevertheless it was able to close near its high for the day. Support $54.
IBM (IBM: $180.22) Positive
Strength during lsst four days confirms double bottom $172 – $173.
Rebounded sharply off October’s 52-week low which could comprise a double bottom. Resistance at $181 – $182 formidable.
Pulte Homes (PHM: $18.25) Positive
Minor Changes: The housing industry must now demonstrate it can gain traction.
PHM may be locked in a sideways trading range between $17.80 and $19.80 until housing attracts serious buyers.
First Solar (FSLR:$56.76) Neutral turning positive
Stock needs a credible institutional research report to assure investors FSLR’s fundamentals are not following China’s track. Spikes of buying volume suggests FSLR may be attracting buyers. Yesterday’s move improves pattern and gives FSLR a shot at $59 – $60.
Nike (NKE:$78.26) Positive
Yesterday’s pullback after Wednesday’s surge was normal. What’s needed here is for NKE to find buyers above $77.50, stabilize then move up.
Hewlett-Packard (HPQ:$28.04) Positive.
Acting well after its breakout from a 9-day consolidation. Support is $27.70, more upside likely.
Polaris Inds. (PII:139.59) Positive
Brief consolidation of Wednesday’s surge could pave way for new 52-week highs. Support $138.
Amazon (AMZN: $395.19) Positive
Was rescued by the FOMC taper rally Wednesday, breaking up through key resistance at $392. Support is $391.60. $400 possible in good market.
Pandora Media (P:$28.20) Positive.
Got well needed breakout following basing action above $26.40. Suppprt $27.70, resistance $29.
NOTE: I AM NEITHER LONG OR SHORT ANY OF THE ABOVE STOCKS
THE ECONOMY:
This may be the most significant week for reports on the economy and Fed action of the year.
For detailed analysis of both the U.S. and Foreign economies along with charts, go towww.mam.econoday.com. Also included is an explanation of each indicator. If you want to know when the next Employment report or any other key report will be released that info is also there under “event release date.”
MONDAY:
Empire State Mfg. Svy. (8:30) flat
Productivity/Costs (8:30) year over year for Q3 was +0.3 pct. vs. +0.2 pct. Q2
PMI Mfg. Ix..(8:58) Index for Dec. 54.4 vs. 54.3 Nov.
Industrial Production (9:15)Nov up1.1pct. vs. +0.1 pct. Oct.
TUESDAY:
FOMC Meeting Begins
ICSC Goldman major chain store sales: same store sales jumped 4.8 pct in the Dec. 14 week
Consumer Price Index (8:30): Nov. was flat vs. a drop of 0.1 pct. in Oct.
Housing Mkt. Ix. (10:00) Rose 4 points to58 ending a three month slump.
WEDNESDAY:
Housing Starts (8:30) Nov. Starts +22.7% vs gain of 6.7% Oct. Permits down3.1% vs. gain of 6.7% Oct.
FOMC announcement on TAPER (2:00 p.m.)
FOMC forecasts (2:00) p.m.)
Bernanke press conference (2:30)
THURSDAY:
Jobless Claims (8:30) Up 10,000 for 12/14 week following an increase of 74,000 the
prior week. Seasonal adjustments blamed
Philly Fed Svy. (10:00) December index 7.0 vs November’s 6.5
Existing Home Sales (10:00) Down 4.3 pct. for fourth straight month. Year on Year now minus 2.5 pct.
Leading Indicators (10:00) October was +0.2 pct. vs September +0.9 pct vs. August +0.7 pct.
FRIDAY:
Quadruple Witching Friday
GDP (8:30) Proj: Third estimate for Q3 revised up to 4.1 pct from the 2nd est. of +3.6 pct. and 2.1 pct. in the 1st est.
Kansas City Fed. Mfg. Ix. (11:00) Proj: Dec. index is 8 vs. 7 in Nov.
RECENT POSTS – 2013
Dec 5 DJIA 15,889 “December’s Two Dilemmas – Watch Your Back”
Dec 6 DJIA 15,821 “No Fed Taper=December Rally – Correction Q1 ?
Dec 9 DJIA 16,020 “Investor Angst Intensifies”
Dec 10 DJIA 16,025 “ Two Big Dates Loom – What to Watch”
Dec 11 DJIA 15,973 “Year End Rally ?
Dec 12 DJIA 15,843 “Trading Opportunities Imminent – First a BUY – Then a
SELL”
Dec 13 DJIA15,739 “Best Six Months Ahead ? Not Without an Ugly Correction in
the Interim”
Dec 16 DJIA January 30 Taper ? If So, Fed Needs to Schedule a Press
Conference – a Tip off”
Dec 17 DJIA 15,755 Fed to Taper January 30 ? It Should, Here’s Why
Dec 19 DJIA 15,875 Taper Today=Sell Off Followed by a rally – No Taper=Rally
Followed by a Sell Off
*Stock Trader’s Almanac;Get it ! This is the most comprehensive compendium of investing savvy between two covers I have ever encountered in my 47 years of writing about the market. Got my first in 1968. There you have it ! I’m an old duff, but I have programmed my computer (brain) with smarts gained from writing about the market in an unbelievably challenging stretch of market activity. I endorse the Almanac – It’s loaded with references, stats, valuable studies, and insight.
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. Brooks may buy or sell stocks referred to herein.
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