No Fed Taper in Sight? Don't Bet on It

George Brooks |

Just how much the U.S. economy has been impacted by the shutdown and near-miss on default will play out in coming weeks.  Preliminary estimates indicate the cost to the economy was $24 billion and 120,000 jobs.

  The Street is beginning to push the expectations of a Fed taper out into 2014.

   Should  expectations for taper change and talk of an earlier taper surface, interest rates will rise and  long-bond prices drop.  A rush to buy long-bonds is not without risk, though a peak may be weeks/months away.

   Most likely, stock prices would also decline if  an earlier  Fed taper  is suddenly talked about.

    Right now, it’s difficult to assess just how strong the four-year economic recovery is. With the shutdown and fallout from the fear of selective default, it will take a while before a reasonable accurate reading can be made.

    The October 6.9%,  ten-day surge in the S&P 500 reversed negative sentiment associated with last week’s white-knuckle showdown in Washington, leaving the Street with the unpleasant prospect of  enduring the potential for some ugly surprises in Q3 earnings.

   So far, 181 S&P 500 companies have reported, 76% beating Street estimates with 52% beating estimates on revenues.  That’s par for the course. We all know the Street low-balls projections to reduce the chance of a disappointment that hammers  a stock it is covering.


   The  DJIA  must break out above 15,440 and S&P 500 above 1,750 to reverse the likelihood of a correction. A drop below DJIA 15,360 (S&P 500: 1,740) would indicate the correction will continue. 

Investor’s first readan edge before the open

DJIA: 15,413

S&P 500: 1,746

Nasdaq  Comp.:3,907

Russell 2000:  1,110

Thursday, Oct. 24, 2013     (8:56 a.m.)

   STOCKS OF GENERAL INTEREST: I am considering the elimination of this section and offering it in a separate publication on a subscription basis.

I would be able to cover more companies, and would not be constrained by a pre-market deadline. Comments welcome: Include opinion about how you think I could even improve commentary bearing in mind these are NOT buy/sell comments.

   The following are based on technical analysis only and  are not to be taken as buy or sell recommendations, but 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.

Apple (AAPL: $524.96) Positive.

Big jump Monday was in anticipation of AAPL’s  intro of its newest iPad and tablet iPad Air. AAPL broke through resistance at $522 and is poised to attack  resistance between $526 and $528. Has a shot at $538 - $544 if market sizzles.

Facebook (FB: $51.90) Positive

Took a day off Monday and then gave ground Tuesday and yesterday.  Acts nervous about earnings due Oct. 30, however this may just be a correction to its 8-day surge. New support is $51.65, that’s not cast in stone.  Needs break above $52.25.

IBM (IBM: $175.77)  Negative but probing for support.

Got some more buying yesterday, but needs a stronger commitment to turn the corner – volume was lacking. Aggressive buying can move Blue across $178. It hasn’t been this low since Q4 of 2011, which may be a turn-on for someone with a crystal ball. A break below $172 raises chances of a drop below $170.  I may replace IBM, unless it looks like it will drop into the 160s, in which case I will try to pick a bottom.

Pulte Homes (PHM: $16.68)  Positive

Watch closely. Earnings expected before the open. If positive, stock could attack $18.  It rose sharply at the open yesterday then pulled back with a heavy volume bounce at the close. Earnings were reported before the open. Management was pleased, but the report is too complex to explain here - access details on the Internet.

First Solar (FSLR:$53.08)  Positive

No change from yesterday. Monday’s surge was triggered by a JP Morgan recommendation, and possibly by panicky short covering. Stock can hit May high of $59, and could go higher if shorts are squeezed to the “ouch” point.  Support is $51.90. Should be buyers if it drops to $50.65 - $52. FSLR has had a big run since its Sept. low of $35.59, and I may replace it with another stock.

Target (TGT: $64.27) Neutral and acting poorly.

Market action yesterday  weakened TGT’s technical pattern. TGT needs the kind of  big buyer above $63 like it got five days ago.

 Hewlett-Packard (HPQ: $23.76)  Positive

Broke out of a tight  “pennant” formation last  Wednesday, with nice follow through Thursday and Friday. Monday was a day of rest, but it ripped on Tuesday closing at $24.05 after reaching $24.39.  Did an about face yesterday, very much out of character with its technical behavior in the last 10 days. Can hit $26 near-term if  its earnings report Oct. 26 cooperates.  Support is  $23 - $23.50.

EBAY (EBAY: $51.73) Neutral

Still licking its wounds from last Thursday’s earnings report. There is confusion here, small thanks to management’s poor handling of guidance.  Needs a big-volume move  above $52.70 to reverse damage done by the report. Support at $51.50 vulnerable. Drop to $50.50 possible.

Amazon (AMZN: $326.75) Positive

Blew out of a tight consolidation pattern  Friday, and took a breather Monday with another surge yesterday. Support is $326. Has a shot at crossing $340 near-term. Earnings to be released after the close must be in line with Street’s expectations.    


I do not own, nor am I short: AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.




   For a detailed account of past and current economic reports, including charts go to: -


Jobless Claims (8:30) PROJ.: For 10/19 335,000

PMI Mfg. Ix.(8:58)PROJ.: Oct. index was 52.7

JOLTS(10:00) PROJ.: Job Openings Labor Turnover Aug. 3.725 mil vs 3.689 July

New Home Sales(10:00) PROJ.:  Sept. 420,000-unit annual rate

Kansas City Fed. Mfg. Ix.(11:00) PROJ.”\: Delayed


Durable Goods (8:30) PROJ.: Sept.:+2.5 pct, ex-trans. +0.5 pct

Consumer Sentiment (9:55) Oct. Index 74.8 vs. 75.2 mid-month Oct.


Oct 15 DJIA   15,301  “What If We Default ?  What If We Don’t ?

Oct 16 DJIA   15,168  “Market Saying “Deal” – A High Risk Bet ?”

Oct 17 DJIA   15,373   “How Much of the “Deal” has the Market Discounted” ?

Oct 18 DJIA  15,371  “No More Wall of Worry for  Bull Market to Climb ?”

Oct 21 DJIA  15,399   “ Analysis Projects High-Low Range for DJIA”

Oct 22 DJIA 15,392    “Is the Stock Market Vulnerable ?”

Oct 23 DJIA  15,467   “Q3 Earnings – Only Worry In Town ?”

  George  Brooks

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

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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.













DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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