Money Manager Dilemma - Your Problem, as Well

George Brooks |

   We are seeing a mix of forces on stock prices that will continue through year-end as institutions adjust portfolios, sell for tax reasons and re-invest in stocks they think stand to be next year’s winners.

   Suddenly, the Fed taper issue is front and center.  The consensus among money managers is for a March taper. If the Fed starts taper in December or January, their portfolios may not be positioned to defend against its impact on stock prices, or be positioned to capitalize on it. 

   Either way, it is a dilemma for them, and could be for you, as well.

   November 1 kicked off the well-publicized “Best Six Months” * for owning stocks. Without a doubt, the six months between November 1 and May 1 has outperformed the May 1 to November 1 six months by a healthy margin.

   But corrections will interrupt this six month period, which I plan to cover later this week.  My guess would be for a correction in January or March/April.

   If the Street is now preoccupied with the timing of a Fed taper, it will be crunching every economic report that is released in coming weeks for an advance on its decision.

   Unfortunately, the shutdown/debt ceiling debacle distorted the economy during October, and the “rebound” numbers from that will be misleading, as well.

TODAY:

     Yesterday, I said the market looked like it wanted to blow out at the open, but that I suspected a brief sell off to DJIA 15,715 (S&P 500: 1,766) would occur instead at which point I believed the market would either rally and close at its high for the day (one-day reversal), or rally then fail to hold its gain, selling off at the close.

   It dropped to within a hair of those  targets, rallied, then sold off.

   That sell off will continue in early trading today.

  I can see a slip in early trading to DJIA 15,648 (S&P 500: 1,753). Any rebound from that level would run into resistance at DJIA 15,700 (S&P 500: 1,760).

   Fed chief Bernanke is scheduled to speak at 7 p.m., but I doubt we will get a clue on taper from that engagement.  The next FOMC meeting will be held December 17 and 18, and be accompanied by a summary of economic projections and a Bernanke press conference.

Investor’s first reada daily edge before the open

DJIA: 15,750

S&P 500: 1,767

Nasdaq  Comp.  3,919

Russell 2000: 1,101

Wednesday, Nov. 13, 2013     (9:01 a.m.)

TECH WATCH:

   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: $520.01) 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: $46.60) Positive

No change:Tested support at $45.80 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: $183.07)  Now positive

Took a breather yesterday after its Monday breakout.  Resistance between $183 and $184 is pretty formidable. Support is $181.60.  Resistance is $184.

 Pulte Homes (PHM: $16.76)  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.  On a positive note, it held at $16.50 for  the third time.  Breaking that counts to $15.80.  Stock needs buyer to push it beyond $17.50.

First Solar (FSLR:$61.72)  Positive

Break through resistance at $61 cleared the way for a move to $63, but sellers  stepped in at the open yesterday to  take it down. Stock stabilized  but may have enough of a seller to slow it down for a few days. Support is $60.50 - $61.

 

Nike (NKE:$76.87) Positive

Stalled at $77.26 when a seller moved in  early yesterday.  Late day spike in volume may turn it up.  Pattern in NKE isfor  kind of a nickel & dime up move.  Not a trading stock like FSLR. Support $76.80.  Break above $78 sets the stage for a move into the low 80s.

Hewlett-Packard (HPQ: $26.22)  Positive

Volume spike at $25.90 may be enough to hold the line for HPQ.  Looks like it needs  a rest after a grinding rise to $26 from  $$20.50. Resistance is $23..Recent strength due to its $3.5 billion U.S. Navy order.

Polaris Inds. (PII:130.11)  Positive

Spent last two days in consolidation with resistance at $130.50, Support at $129.20.

It has its work cut out for it to top resistance in the $132 - $134 area.

Amazon (AMZN: $349.53) Positive

The big hurdle will be $360.  Raymond James’ Aaron Kessler  raised his rating to Strong Buy from Market Perform.  There could be some year-end selling here. Support is $344 - $346. 

Pandora Media (P:$28.24) Positive.

Yesterday’s jump indicates P is poised for a breakout, but the pattern hers is for a lot of false runs that yield to a correction. At some point, P will move several points in one direction or the other.  Earnings are  due after the close on Nov. 21.

 

THE ECONOMY:

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

TUESDAY:

NFIB Small Business Optimism report (7:30) Down sharply in Oct. to (1.6 from 93.9

Fed’s Fisher speaks (3:00a.m.) ?

Fed’s Narayana speaks 1:00p.m.

Fed’s Lockhart speaks (1:50a.m.)

WEDNESDAY:

Fed. chiefBernanke speaks (7:00p.m.)

THURSDAY:

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.)

FRIDAY:

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  

                                       Happen”

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 Market”

Nov 12 DJIA 15,783 “Get Ready for Year-End Cross Currents”

  George  Brooks

“Investor’s first read – an edge before the open”

sensiblesleuth@gmail.com

*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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