Has Fed. Vice-Chair Janet Yellen lowered the wall of worry this grand bull market has to climb ?
With her testimony before the Senate Banking Committee last week, Yellen took taper off the table for so many months to come, it is no longer a “worry.”
That suggests the coast is clear to run the table, buying stocks at increasingly higher valuations, almost with your eyes closed ?
Looks like it’s Yellen’s market before Bernanke has even left.
It’s a relief Fed Vice Chair breezed through the Senate confirmation hearings so well and is an odds on bet to assume the chairmanship of the FRB. The Committee votes early this week, then her confirmation goes to the full Senate where she needs 60 votes.
The Fed has reminded us again and again, it is set on accommodating the economy, and Yellen took that mantra to new highs last week with stock prices following along spiritedly.
Among other things, Yellen noted that bond-buying benefits still outweigh the costs; that the traditional valuation of equities, which have risen “robustly” does not suggest a bubble; that promoting a very strong economy is imperative; and that it’s important not to remove support for a fragile economy, since the “tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero.”
CONCLUSION:
Fed Vice-Chair Yelled has pretty much assured the Street that interest rates will remain historically low and the worry about a taper many months away.
What could possibly trigger a correction ?
At this point, a correction would have to be a “technical” correction, where pricey valuations prompt institutions to curb new buying, while increasing selling in order to lock in sizable gains.
The market is on a tear, with speculative fever mounting. This is going to be hard to shut off.
As I have repeatedly noted, this bull market has a long way to run, just not in a straight line.
I see the possibility of a sharp correction in January or March/April, followed by a renewed uptrend.
Presently, I think the market has to run a lot higher before that can occur.
In the interim, expect the crosscurrents caused by year-end tax selling and portfolio window dressing to muddle the technical patterns of a lot of stocks.
Stocks that should be going up, will stall, While a number of 2013’s underperformers will move up smartly.
To-date, the S&P 500 is up 9.2% since early October, 26% this year and 170% since the bull market began in early March 2009.
Support is DJIA: 15,895 (S&P 500: 1,788)
Investor’s first read– a daily edge before the open
DJIA: 15,961
S&P 500: 1,798
Nasdaq Comp. 3,985
Russell 2000: 1,116
Monday, Nov. 18, 2013 (SENT Sunday 2:23 p.m.)
NOTE: My posts may be fewer and less detailed this week as I will have to spend several days in the hospital following surgery Monday.
TIMING – OPPORTUNITY STOCKS
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: $524.99) Positive.
Looks like someone used Thursday’s breakout to sell, but some buying showed late Friday to stabilize prices.
Support $524. Resistance $527.40. Odds favor a small spike down then a rally.
Facebook (FB: $49.01) Positive
There is a seller at $49.50 Support $47.85.
IBM (IBM: $183.19) Now positive
Stock’s one-day reversal after three consolidation days suggests another breakout to $186. Support is $182.60 Resistance $183.55.
Pulte Homes (PHM: $18.10) Positive
PHM investors should send Fed Vice- Chair, Janet Yellen a thank you note for a strong follow through in their stock Thursday. Yellen assured the Senate Banking Committee she would pursue a accommodative Fed policy if confirmed as Fed Chair. The stock has been up sharply over the last three days. Support is now $17.70, resistance is $18.25.
First Solar (FSLR:$64.19) Positive
No change. Strong fundamentals and panicky short sellers prompt one breakout after another. Support rises to $63 – $64. Resistance at $65.80 and that may not last long.
Nike (NKE:$79.22 ) Positive
Another new high. Nike headed for 80s. Support is now $79.85.
Hewlett-Packard (HPQ: $25.21) Positive.
Potential product recall of Chromebook II hammered HPQ yesterday taking it down 5.4%. An immediate rebound will be difficult near-term. Stock could slip a bit more to $24.35. Resistance is now $25.25. Company will have to define the impact of a recall primarily centered on an overheating charger.
Polaris Inds. (PII:134.80) Positive
Corrected Wednesday’s surge with a pullback of 2.18 points, then stabilized Friday. Given it had moved up from $126 six days ago, the drop wasn’t alarming. Stock should find support at $134.10. PII’s ability to plow through formidable resistance Thursday between $130 – $132 was very impressive.
Amazon (AMZN: $369.17) Positive
Raymond James’ Aaron Kessler recently raised his rating to Strong Buy from Market Perform. Breakout was classic following Wednesday’s one-day reversal. Support is $367. Stock looks good for $378.
Pandora Media (P:$31.56) Positive.
Another big day for P, up $2.09 on increased volume. Support rises to $30.65.
THE ECONOMY:
Prior to Vice Chair Janet Yellen’s Senate Banking Committee confirmation hearing last week, there was a concern for an early taper. Her testimony seemed to assure the Street that the Fed will continue to accommodate the economic recovery if she becomes chairman. 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.”
The economy is again a major impact factor of the stock and bond market since it stands to dictate Fed policy change.
MONDAY:
Housing Market Ix. (10:00)
TUESDAY
Employment Cost Ix.(8:30)
WEDNESDAY:
Consumer Price Ix (8:30)
Retail Sales (8:30)
Business Inventories (10:00
Existing Home Sales (10:00)
THURSDAY:
Jobless Claims (8:30)Producer Price Ix. (8:30)
PMI Mfg. Ix. (8:58)
FRIDAY:
JOLTS(10:00) Job Opening/Labor Turnover:
Kansad City Fed Mfg. Ix. (11:00)
RECENT POSTS – 2013
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 Market”
Nov 12 DJIA 15,783 “Get Ready for Year-End Cross Currents”
Nov 13 DJIA 15,750 “Money Manager Dilemma – Your Problem, as Well
Nov 14 DJIA 15,821 “Feeding Frenzy in 2014’s Winners ? Big Day for “TECH
WATCH” Stocks”
Nov 15 DJIA 15,876 “Yellen – No Taper – Surprise January Correction ?
George Brooks
“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
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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.
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