No Fed Taper = December Rally - Correction Q1

George Brooks |

    On December 18, the FOMC will announce its decision to taper or not taper.

    The Street has been down this road with the Fed numerous times over the last six months, not to mention the many times it responded negatively to any economic report that was good enough to suggest the Fed could begin tapering.

    Bad news was seen by the QE-addicted Street as good news, because  it suggested  taper out of QE was not imminent.

    Employment, production and housing news this week has been upbeat.

The Employment Situation report was released this morning at 8:30 and it beat expectations by a wide margin. November Nonfarm payrolls increased 203,000, Private Sector jobs were 196,000 and the Unemployment Rate dropped to 7.0% from 7.3%.

    These are the kind of numbers that will enable the Fed to justify taper, THE BIG QUESTION IS WILL IT DO IT IN DECEMBER ?

   After some hesitation following the report, the futures exploded on the upside.

Indicating a strong rebound in the market. While the numbers this week were good, the market is telling us they are not good enough to justify a December taper.

   At some point the Fed will taper and do so because the economic numbers are showing accelerating growth, and you know what ?  An extension of the economic recovery can’t really be all that bad, can it ?

   It is imperative that the economy pick up steam to justify stock prices at this level. The S&P 500 trades  at a P/E 20% above norm with most of this year’s 25% increase coming from an expansion of P/E, not earnings growth.

   TODAY:

Looks like the Street thinks it is getting it both ways – no Fed taper, but an improving economy, hmmm.

   The DJIA should touch 16, 025 (S&P 500: 1,808) intraday. No room here for the bulls for a rally failure where the market gives back most of its gain for the day.  

   Be careful not to reach for stocks that are marked up at the open.

Investor’s first reada daily edge before the open

DJIA: 15,821

S&P 500: 1,785

Nasdaq  Comp.4,033

Russell 2000:  1,122

Friday, Dec. 6, 2013

   NOTE:  Anyone seriously interested in a  very heavy, but very readable monthly analyses of the economy and financial markets should subscribe to A. Gary Shilling’s “INSIGHT.”  This is super crunching, but a MUST read. No punches pulled, but  not always the best bedtime read.

  Most honest analyst in the investment business.  Well, OK, that really isn’t a big compliment. Let’s say, just a refreshingly honest, straight shooter with an excellent staff.  Web: agaryshilling.com. Ph: 973-467-0070.

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: $567.90) Positive.

Big News out of China as AAPL iPhone is cleared for marketing to its 759 million subscribers. $600 ?  Sellers used the news to take profits when stock crossed $572 yesterday, which is its current resistance. Support is $564.

Facebook (FB:48.34)  Positive

No change:Needed a move across $48 to validate  recent bottom and set the stage for a renewed up move and got it yesterday. Stock can now start working its way up to the low 50s, though it will encounter sellers along the way, especially profit-takers who bought it before its breakout at $27 in late July.

IBM (IBM: $176.08)  Neutral/Negative

 IBM is still struggling with an irregular base. Overhead supply between $178 and $181 is very formidable. Without serious buying, IBM will test 52-week low of $172.16. Breaking that takes IBM  to $158 - $162.

 Pulte Homes (PHM: $17.99)  Positive

While PHM got a big boost from  Fed Vice-Chair Janet Yellen’s assurance the Fed will continue to accommodate the economic recovery and especially housing, the industry must now demonstrate it can gain traction. That may be in the works with the big jump in October’s New Home Sales. PHM should attract buyers in this area. if housing is a “go.”  Near-term risk is $17.25.

First Solar (FSLR:59.78)  Positive

Looks like year-end profit-taking with sellers using Wednesday’s strength to sell. FSLR can swing 2 – 3 points intraday.  Resistance is $61, Support is $59.50.

Nike (NKE:$78.95) “the inchworm”  Positive 

No change:Some profit-taking showed up in recent days. Support is $78.25. Crossing $79.25 improves its pattern and sets the stage for higher prices.

Hewlett-Packard (HPQ: $27.25)  Positive

No follow through to Wednesday breakout re-sets support and resistance levels. Very similar to the mid-November reversal which stabilized. Support now is $26.30, resistance $27.60.

Polaris Inds. (PII:135.13)  Positive

Yesterday’s market action was bullish suggesting a move across $135 and possibly a new 52 week high above $137.

Amazon (AMZN: $384.49) Positive

Needs a move across $390 to renew uptrend.  Support $382.

Pandora Media (P:29.36) Positive.

Sellers used yesterday’s rally to sell. This volatility is typical of Pandora’s trading. This is also characteristic  of year-end action. Support is $28.50. Resistance is $30.

THE ECONOMY:  HUGE !

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. 

  But the Street is once again worried about an early Fed taper, and this week’s economic reports may just raise its concerns to a higher level.

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.” HOWEVER: this site will not post data and charts for the Thanksgiving Day week electing to take a week off. The calendar below is current.

MONDAY:

PMI Mfg. Ix. (8:58) November index rose to 54.7 from 51.4 October

ISM Mfg. Ix. (10:00) Index rose to 57.3 from 56.4

Construction Spend (10:00) Overall spending in October was up 0.8 pct vs. gain of 0.3% September. Data may be affected by the shutdown

TUESDAY:

ICSC Goldman Store Sales ((7:45) Down 2.8 pct. for week 11/30

WEDNESDAY:

ADP Employment (8:15) 215,000 private sector jobs were added in November, well above forecasts for 170,000.

International Trade (8:30)October trade gap improved due to rising exports. The gap narrowed to $40.6 billion from $43.0 billion

New Home Sales (10:00) Two reports yesterday due to shutdown delays. September New Home Sales dropped 6.6 pct.,  however, October sales jumped 25.4 pct.

ISM Non- Mfg. Ix. (10:00) The index slipped to 53.9 in November from 55.4.

Fed Beige Book  (2:00)

THURSDAY:

GDP (8:30) Q3  up 3.6 pct, but inflated by estimates for inventory growth

Jobless Claims (8:30) Down 23,000 week ended Nov. 30.

Factory Orders (10:00)Down 0.9 pct. October. Ex transport - flat

FRIDAY:

Employment Situation (8:30)

Personal Income/Outlays(8:30)

Consumer Sentiment (9:55)

RECENT POSTS - 2013

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 ?

Nov 18 DJIA  15,961  “Green Light to Load Up on Stocks ?

Hospital

Nov 25 DJIA  16,064  Fetch the Blinders – Here come the forecasts

Nov 26 DJIA  16,072   Time to Shop for New Winners and Old Winners Getting  

                                     Whacked by  Profit-Taking”

Nov 27 DJIA16,072   “December Head-Fakes Galore – Raises Risks”

Nov 29 DJIA 16,097  “Stock Market Bubbles Don’t Pop to a Full House”

Dec 2   DJIA 16.086  “Serious Stuff Coming This Week and Next”

Dec 3   DJIA 16,008  “Hunting Season – Be Armed and Ready”

Dec 4   DJIA 15,914  “Holidays, Or Not, DO NOT Take Your Eye Off This Market”

Dec 5   DJIA 15,889  “December’s Two Dilemmas – Watch Your Back”

  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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