Let’s step back for a look at some of the challenges you will encounter during the rest of the year.
-News headlines that tempt you to go “all-in.” Stuff like:
-“The S&P 500 has just hit its 36th new high this year.”
- “The S&P is up for the fifth, sixth, seventh, etc, time in a row, the most since…..”
-“12.7 billion has been pumped into stock mutual funds after net withdrawals in each of the last five years.”
-“Dow is up 20% this year, most since 2003…..”
-Annual forecasts for 2014, some projecting the best year ever, others – DOOM !!
-Astounding accounts of money managers who have posted huge gains so far this year.
All this fluff can cause frustration and the temptation to bet the ranch. Keep your cool, and DO NOT get sucked in by 2014 annual forecasts, even if I make one (doubtful). There are always too many balls up in the air in this business of investing, any one of which can come down without warning to change the picture.
No one can reasonably project what will happen 3, 6, 9 months out. Too many variables.
Political brinkmanship and dysfunction can be expected, but the market has become immune to these follies.
Fed taper talk will bedevil investors – December, January, March ? The “talk” seems to have more impact than an actual decision will. Then too, the Street has no assurances Vice-Chair Janet Yellen will be confirmed, adding to uncertainties.
And, if the economic numbers don’t justify a Fed taper any time soon, should investors worry about a mini recession ?
I never liked the market action this time of the year. A if the holiday season cannot create enough stress, the stock market tends to pile on.
Investment decisions are made for different reasons than at other times of the year. Tax considerations and portfolio window dressing can prompt selling and buying that may not take place earlier in the year.
The market action of stocks can be affected by this action. One or more of your stocks can perform poorly simply because an institution is locking in a big gain. Stocks you wanted to buy at depressed prices can rally before you get a chance to act.
What’s my point ?
Be prepared for abnormal market behavior. That doesn’t suggest negative action, just a lot of stop and go.
The prospect of an early Fed taper is back. Just chatter about it is enough to rattle cages. Then too, I sense some early profit taking, especially as a result of a potential early taper. Who wants to see fat gains vanish ?
The managers of many hedge funds base compensation on the amount of money they racked up for the fund, some receiving as much as 20% of the profits. Are they going to wait to take profits, if odds increase that the gains will be less one month from now ?
It’s like riding a packed subway car making local stops. You get bumped one way, then another.
TECHNICALLY: At first glance, it looks like the market is poised to blow out at the open. However, I suspect a brief selloff to DJIA 15,715 (S&P 500:1,766). At that point, chances are the market will either rally closing at its high for the day (one-day reversal), or rally then fail to hold the gain selling off into the close.
Investor’s first read– a daily edge before the open
S&P 500: 1,771
Nasdaq Comp. 3,919
Russell 2000: 1,101
Tuesday, Nov. 12, 2013 (9:01 a.m.)
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: $519.04) Positive.
No change: Remains in consolidation, but rebounded from Thursday’s setback. Support is $518. Some selling at $521. Once past that, AAPL can rise to $526.
Facebook (FB: $46.20) Positive
Tested support at $45.70 but flirting with slip to $43 - $44. Needs a one-day reversal that closes stock at $46. Pick up in volume at the close Monday suggests a buyer may have stepped in to catch stock for sale. Stock has traced out a head & shoulders top reversal pattern but I am suspect, since the duration between beginning of the left shoulder and right shoulder is too short.
IBM (IBM: $182.88) Now positive
Yesterday’s break through resistance at $180.60 paved the way for a another upleg in IBM’s recovery. Support $181.70.
Pulte Homes (PHM: $16.71) Positive
Pop in interest rates and taper talk has housing industry nervous and PHM’s stock is struggling to hang on to a positive status. Support is $16.20, resistance $17.65
First Solar (FSLR:$63.14) Positive
Break through resistance at $61 cleared the way for a move to $63. Shorts are having a bad time of it. Support is $62.75. Blowout earnings are the fundamental support FSLR needs to move higher.
Nike (NKE:$77.16) Positive
Consolidating nicely and could move higher shortly. Support $76.80. Break above $78 sets the stage for a move into the low 80s.
Hewlett-Packard (HPQ: $26.35) Positive.
Another breakout on the upside with the potential of crossing $27. Support is $26./25.Recent strength due to its $3.5 billion U.S. Navy order.
Polaris Inds. (PII:130.24) Positive
Stabilized Thursday after high-volume spike down. Rebound Friday was disappointing, but PII made up for it yesterday with a 3-pointer. It has its work cut out for it to top resistance in the $132 - $134 area.
Amazon (AMZN: $354.37) Positive
Got the push it needed to break through resistance at $350. The big hurdle will be $360. Raymond James’ Aaron Kessler raised his rating to Strong Buy from Market found support at $342 with nice rebound following.
Pandora Media (P:$27.15) Positive.
Opinions on P vary, but seem in line with investors’ long or short position. This one can move sharply either way. Earnings due Nov. 21 after the close. A dangerous stock to be on the wrong side of. Thursday’s drop did not change its positive status. After yesterday support is now, resistance is $28.35.
A break above that level could pave the way for a move into the lo 30s.
While the economic reports released this week are few in number, they are significant. Though the accuracy of these reports may still be suspect due to the shutdown, the Street will be watching for clues about the economy’s strength, since it will influence the timing of Fed taper. With renewed concern about an early Fed taper, Fed. Chief Bernanke’s speech Wednesday, 7:00p.m. will be parsed for clues. For a detailed account of past and current economic reports, including charts go to: mam.econoday.com - www.mam.econoday.com
Fed’s Fisher speaks (3:00a.m.) ?
Fed’s Narayana speaks 1:00p.m.
Fed’s Lockhart speaks (1:50a.m.)
Fed. chiefBernanke speaks (7:00p.m.)
Jobless Claims (8:30) Proj. 330,000 for week ended 11/9
Productivity/Costs (8:30) Proj.: Q3 +2.3pct.
Fed’s Plosser speaks(9:a.m.)
Empire State Mfg. Svy (8:30) Proj.: Index Nov. 5.5 vs. 1.52 Oct.
Import/Export Prices(8:30) Proj. Oct. -0.5 pct.
Industrial Production (9:15) Proj. Oct. +0.1pct. vs. +0.6 Sept.
Wholesale Trade (10:00) Proj. Sept. +0.4pct.
RECENT POSTS - 2013
Oct 25 DJIA 15,509 “Best Six Months for Owning Stocks”
Oct 28 DJIA 15,570 “Do I Detect Speculative “Fever “ ? If So, What Can
Oct 29 DJIA 15,568 “ When Will the Small Investor Plunge ?”
Oct 30 DJIA 15,680 “Don’t Rule Out Fed Taper by Year-End”
Oct 31 DJIA 15,618 “Easy Does It ! Market Nervous, Needs Breather”
Nov 1 DJIA 15,545 “Rally Failure, Correction to Continue ?
Nov 4 DJIA 15,615 “Room to Run – Just Ditch the Blinders”
Nov 5 DJIA 15,639 “Market Crossroads – Which Way ?
Nov 6 DJIA 15,618 “Bulls Hold the Edge, But What About Interest Rates ?
Nov 7 DJIA 15,747 “Early Profit Taking or Warning of a Correction ?”
Nov 8 DJIA 15,593 “Time for the Street to Get Off the Fed Teat”
Nov 12 DJIA 15, 761 “The Economy, Interest Rates, The Fed, Stock Mrket”
“Investor’s first read – an edge before the open”
*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
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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