The most significant thing about yesterday’s trading is the market tried to go down but couldn’t.
There was no panic to sell. But buyers are wary, opting to wait for more clarification from the Fed on QE.
In the interim, the market will try to rally, and the strength of that rally must be monitored closely. If the rally is brisk and the DJIA breaks up through 15,450 (S&P 500: 1,694) a further correction will have to wait, If the rebound is pained and unimpressive, the market needs to do more work, i.e., lower prices, or a sideways-to down consolidation.
At some point, the Street must graduate from its ridiculous “bad news is good news” mentality to “good news is good.”
That is what is needed to sustain the next major up leg in this bull market, not an investment community that shows up hat-in-hand asking the FRB to continue its hand holding.
A break beyond resistance mentioned above is critical to the near-term direction of the market, BUT a rally failure is unacceptable, a one-day spike that gives back all of a good day’s gain. The next resistance level would be DJIA 15,498 ((S&P 500: 1,698).
Abreak below DJIA 15,345 (S&P 500: 1,680 would be a bad sign.
Investor’s first read– an edge before the open
Russell 2000: 1,053.07
Tuesday, August 13, 2013 (9:05 a.m.)
TECHNICAL OBSERVATION – STOCKS:
The following are observations based on solely on technical analysis and don’t give consideration to fundamentals or changes in brokerage ratings which can have an immediate impact on stocks, justified or not. The idea here is to give readers insight into the likely trends and turns in the stock’s price, short-and long-term.
I picked up on AAPL and FB last year when they were in a tailspin, on IBM recently for the same reason and am including Pulte, since it has been in a pronounced slide. These are not to be construed as buy or sell recommendations.
Buyers in-size showed up before the open and were there throughout the day cementing the $453 level as solid support. Next move could be across $474 en route to $480. The pattern has changed here from persistent (but patient) sellers to buyers on dips.
Facebook (FB - $38.48)
Resistance has been trending lower from $39 to $38.40, but support is consistent at $38.15, a descending triangle that can be reversed with a high-volume break out above $38.50.
FB should consolidate with support in the $35 - $36 area, the fundamentalists may not wait for a drop to that level.
Three days of stability suggest IBM can bounce technically to the $192 - $194 area where resistance should be formidable. A break above $189.80 would pve the way.
Foreseeable risk is $174. Institutions may simply sell to free up cash for other stocks with more immediate potential. Each point down impacts the DJIA by about 13 points.
PulteGroup (PHM- $15.67) WATCH closely, turn possible.
Today: There is resistance at $15.90. A spike in volume in the final hour of trading could be significant and indicate buyers are entering the group. A comparable spike in volume in late day trading occurred in Lennar (LEN) and DH Horton (DHI) Watch closely.
Home builders have taken a pasting and Pulte is no exception down 35% from its May high. More slippage is possible, especially if the overall market drops. A dip below $14 is possible, but it would have to have help from a plunging market.
Housing Starts will be reported at 8:30 a.m., Friday.
HOME BUYER BUYING PANIC ?
Mortgage rates rising, home prices rising, inventories decreasing !!
The calendar for economic reports is heavier this week, especially Thursday (see below).
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com
Treasury Budget (2:00) July’s budget deficit for July was $97.6 billion. The fiscal year deficit is now $607 billion, down 38% from a year ago.
NFIB Small Business Optimism (7:30) Proj.: 94.5 July after 93.5 in June
Retail Sales (8:30) Proj.: +0.3 pct July after a gain of 0.4 pct on June. Excl. motor vehicles +0.4 pct
Import/Export Prices (8:30) Proj.: +0.9 pct July
Business Inventories (10:00) Proj.: +0.2 pct
Producer Prices(8:30) Proj.: +0.3 pct July After jump of 0.8 pct in June. Excl. food and energy +0.2 pct
Jobless Claims(8:30) Proj.: 330,000 (8/10) vs. 333,000 prior week
Consumer Price Ix. (8:30) Proj.: +0.2 pct July, same for ex-food/energy
Empire State Mfg. Svy.(8:30) Proj.: 10.0 for Aug. vs, 9.46 July
Industrial Production 9:15) Proj.: +0.3 pct July, Mfg component same
NAHB Housing Market Ix.(10:00) Proj.: 56 for Aug
Philadelphia Fed Svy (10:00) Proj.: 15.0 for Aug. vs. 19.8 in July vs. 12.5 in June
Housing Starts (8:30) Proj.: 0.900 million-unit rate. Permits 0.935,000 July. June starts were down 9.9 pct after an 8.9 pct jump in May
Productivity and Costs (8:30) Proj.: +0.6 pct
Consumer Sentiment(9:55) Proj.: 85.5 for Aug vs. 85.1 July
RECENT POSTS: 2013
July 31 DJIA 15,520 “Has the Market Discounted a Fed Policy Change ?”
Aug 1 DJIA 15,499 “Dear Fed, Lay It Out There, We Can Handle It”
Aug 2 DJIA 15,628 “Street Must Taper Out of Reliance on Fed Stimulus”
Aug 5 DJIA 15,658 “August/September Correction Looms”
Aug 6 DJIA 15612 “Market Doesn’t Need Reason to Correct”
Aug 7 DJIA 15,518 “Uncertainties to Plague Market Until September”
Aug 8 DJIA 15,470 “DJIA 14,250 by Early October, or Worse
Aug 9 DJIA 15,498 “Has a Correction Already Started ?”
Aug 12, 2013 15,425 “Taper, A Withdrawal Process From Addiction”
“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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