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.
TODAY:
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 read– an 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: [email protected]. 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.
ECONOMIC REPORTS:
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
THURSDAY:
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
FRIDAY:
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.
RECENT POSTS – 2013
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”
NOTE: 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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