As the fall approaches, we have a nasty combination of uncertainties shaping up – Syria, Fed taper, debt ceiling brinkmanship, and speed bumps in our economic recovery.
Any one, or more of those negatives could hammer stock prices between now and late October, JUST IN TIME FOR THE BEGINNING OF THE “BEST SIX MONTHS FOR OWNING STOCKS”*
Get ready now, be sure you have a cash reserve to take advantage of lower prices.
Crises produce opportunities, but they can be hard to exploit.
For one, confusion reigns at extreme bottoms when so many stocks are down making choices difficult. Hesitation to act can cause an investor to miss the lowest prices. Then too, conditions are so dire at these junctures, investors are simply too paralyzed to act.
It helps to screen the stocks you are sure you want to buy well in advance, then start taking a position piece by piece. Taking a partial position eases the decision process and reduces risk.
All this assumes there will be a buying opportunity in the fall, most likely October or November. Odds of it happening are strong enough to give this serious consideration.
Even without the Syrian crisis, the market was struggling yesterday. Durable Goods for July dropped more than expected and the economy in Texas is flat per the Dallas Fed Manufacturing report released yesterday.
I am disturbed by the slump in retail stocks (see Target below). This could be a blip where the consumer needs a breather, but it could raise the odds the Fed won’t taper in September.
A delay in taper would trigger a brief but sharp rally, followed by a decline as the Street begins to worry more about the economy than about its Fed-security blanket.
TODAY: Big drop at the open with DJIA off some 186 points before 10 o’clock. To the 14,760 area (S&P 500: 1,633).
The uncertainties troubling the Street are not the kind that can be eliminated near-term, so there is little to temper the decline in stock prices.
I still feel DJIA 14,250 (S&P 500:1,542) is likely by late October. The DJIA has declined almost twice as much as the S&P from its Aug. 2 high, which accounts for the difference in my projection of their decline from here.
Investor’s first read– an edge before the open
S&P 500: 1,656.78
Nasdaq Comp.: 3,657.57
Russell 2000: 1,038.47
Tuesday, August 27, 2013 (9:10 a.m.)
TECHNICAL OBSERVATION – STOCKS:
The following are observations based 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, and picked up on IBM, Pulte, First Solar, Target, and Hewlett-Packard recently for the same reason. These are not buy or sell recommendations, and are not stocks I have recommended.
I will primarily focus on quality stocks that have had a decline and seek to assist readers in targeting points where the stock will find temporary support levels and hopefully the final support level from which the stock can turn around.
But I will also track stocks in an uptrend
Again, these are purely technical assessments without consideration for fundamentals.
Apple(AAPL: $502.97 )
Note: Targeted the Turn around Apr. and Jun. 2013 (double bottom). This is follow up.
Pattern: Positive, consolidating recent up move.
Support is $500. Rally fail yesterday after nice run to $510 confirms AAPL in consolidation, brief slip to $490 possible, even $486 – normal give and take after big move.
Facebook (FB – $ 41.34)
Note: Targeted the turnaround Sept. 2012, this is the follow up.
Pattern: Positive – Broke out of consolidation on increased volume Friday and followed through with another pop yesterday
Resistance: new tutf – $43.50 – $46
Support: Breakout raises support to $41.25
IBM ($ 184.74 ) No change from Friday
Note: Started coverage Aug. 7, 2013 after big plunge in stock
Support: $184.25 won’t hold – look for break below $180, but after attempt to hold at $180.75. Be aware that IBM has ranged four times up and down between $185 and $215 over the last two years. Unless the fundamentals are horrendous it is due for institutional buying, most likely in this area and possibly at or a smidge below $180.
Right now, there are sellers that must be taken out.
Each point up or down impacts the DJIA by about 13 points.
PulteGroup (PHM- $ 16.15)
Note: Started coverage Aug. 12, 2013
Pattern: Positive, but needs test of recent low ($14.23) needs to develop in coming weeks to cement upturn. The Street is on edge about how much the rise in mortgage rates will impact the homebuilding and housing industry. Common sense say it will have a temporary impact, but rates are still low, house prices rising and inventories down. If people want to buy a house, they had better not tarry long.
Resistance: $16.38 Looks like a seller there
First Solar (FSLR:$38.78 )
Note: Started coverage: Aug.: 22
Pattern: Negative, ran into sellers at $40, again at $39. Big gap between $46 and $42 will be hard to work through. Yesterday’s action hurt chances for near-term rally.
Support: Rises to $38.40. Stock has had some nice buying in last three days. Odds favor a sideways basing action between $37 and $40 with some support at $38.
Target (TGT:64.13 ) A warning economy is slowing ?
Note: Started coverage Aug: 22:
Support: $64.12. Has had a number of spikes in volume in three days indicating institutions are dumping but suggesting SOMEONE is buying. Market action last 3 days was ugly ! Stock needs big buyer or it is headed for $61 – $62.
Hewlett-Packard (HPQ: 22.27)
Note: Started coverage Aug. 23
Pattern: Negative, probing for comfort level
Support: $22.45 but untested. Penetration raise chances of $19.85. Yesterday’s rally failure raises odds of a downside breakout.
I do not own, nor am I short AAPL, FB, IBM, PHM, FSLR ,TGT, or HPQ
Heavy schedule this week, also speeches by Federal Reserve officials
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
Durable Goods (8:30) Down 7.8 pct vs. projection for a 4.0 pct decline, Ex transportation was a drop of 0.6 pct.
Dallas Fed Mfg (10:30) August index dropped to 7.3 from 11.4. New orders were 5.4 vs 10.8.
ICSC Goldman Store Sales (7:45) Proj.: none
S&P Case-Shiller Home Prices (9:00) Proj.: June +1.0 pct m/m, +12.2 pct. y/y
Consumer Confidence (10:00) Proj.: Proj.: Aug. index 78.0
Richmond Fed Mfg. Ix. (10:00) Proj.: Aug. index improved to zero vs, Jul. minus 11
Pending Home Sales (10:00) Proj.: Jul. -1.0 pct.
Q2 GDP (8:30) Proj.: +2.2 pct. at annual rate. Comparisons affected by annual revision
Jobless Claims (8:30) Proj.: 330,000 for week ended 8/24 vs. 336,000 for prior week.
Corporate Profits (8:30) No proj.
Bloomberg Consumer Comfort Ix. (9:45) No proj.
Fed’s Jeffrey Lacker speaks (2:00)
Fed Balance Sheet (4:30) Proj.:
Fed’s James Bullard speaks (7:45 p.m.
Personal Income/Outlays (8:30) Proj.: Jul. PI +0.2 pct., Expenditures +0.3 pct
Fed’s James Bullard speaks 9:00)
Chicago PMI (9:45) Proj.: Aug. index 53.0 vs. 52.3 Jul.
Consumer Sentiment (9:55) Proj.: Aug. index 80.0
RECENT POSTS: 2013
Aug 15 DJIA 15,337 “October Buying Opportunity at Much Lower Levels”
Aug 16 DJIA 15,112 “Fed Pressed for Clarification – Rallies Suspect”
Aug 19 DJIA 15,081 “Will Fed Intervene to Stop the Carnage ?”
Aug 20 DJIA 15,010 “Rally Ahead of Wednesday’s FOMC Minutes”
Aug 21 DJIA 15,002 “No September Taper = Bad For Stock Market”
Aug 22 DJIA 14,897 “Street’s Angst Not About First Taper, but……”
Aug 23 DJIA 14,963 “Big Day: Rebound or Rally Failure ?”
Aug 26, DJIA 15,010 “Fed Policy Change – Big Impact on Stock Market ?”
*Stock Trader’s Almanac – New edition due shortly
“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.