No Taper! No Summers! Selling Opportunity?

George Brooks |

If a taper decision by the Fed isn’t enough to stir the pot Wednesday, how about  the Lawrence Summers withdrawing from consideration for Fed chief; the release of  9 key economic indicators with speeches by five Federal Reserve officials, one Thursday and four Friday between 12:30 and 1:45 p.m.?

   Oh…. and Friday is “Quadruple Witching Friday,”  when contracts for stock index futures, stock index options, stock options and single stock futures all expire. This simultaneous expire occurs only four times a year (3rd Friday: Jan., Mar., Jun., Sep.), and can be accompanied by increased volatility, sometimes extreme.

   The impact has lessened over the years, but  to occur during a high-impact week like this may rattle the cage.*

FED TAPER ANNOUNCEMENT WEDNESDAY:

   The Fed’s mishandling of the taper timing issue in June, first with Fed chief Bernanke’s comment about a September taper and a wrap up in mid-2014, which jacked up mortgage rates and triggered a drop in stock prices, then with counter comments by Fed officials in days following which triggered an abrupt rebound in the stock market.

   The Fed has to get it right this time, and that’s what I think it hopes to accomplish with the speeches following Wednesday’s announcement.

   To-date, the economy has not developed enough traction to make a near-term taper a sure thing.  It’s a close call.  Whatever the call, the Street must feel confident interest rates won’t rise much more. 

   That’s the big challenge for Bernanke & company.

   So far, the Street views a taper out of QE as a negative, and continued taper as a positive, even though the latter would be justified by sluggish economic growth. 

  An announcement Wednesday of the first taper should trigger a sell off, but that stands to be followed by a “relief” rally based on the knowledge that the big “Q” is behind us.

   The bigger question is that  this is a change in a Fed policy that started in early 2009, thus begins a countdown to a final taper out of QE, which may come in mid-2014 if the economy gains enough traction.

NEW FED CHIEF:

   Lawrence Summers has withdrawn his name from the candidacy for the chairmanship of the Federal Reserve, so it’s between Vice Chair of the BOG of the Fed, Janet Yellen and a recently announced candidate, Donald L. Kohn.  While Kohn is less known outside financial circles, his credentials are impeccable. Both are qualified and neither highly controversial !

     CONCLUSION:

Is this  the Larry Summers rally, or is it a rally anticipating an announcement Wednesday that the Fed won’t be starting to taper out of QE this month ?

   Odds slightly favor a DELAY in tapering this month. I think the Fed needs to see more data. The 10-year treasury has dropped to 2.81 pct. from 2.99 pct. on Sept. 15. I am not sure how the Fed will achieve it, but I see a big effort to ensure the Street, rates won’t be rising in the near-to intermediate future.

   While both interest rate and stock prices can rise for a while in tandem, this is not the environment for that.

THIS WEEK:

    The market will surge at the open today, with a good chance of a new high in the S&P 500 (1,709) this week offering investors an opportunity to lock in some profits.

Investor’s first readan edge before the open

DJIA:  15,376

S&P 500:  1,687

Nasdaq  Comp. 37.22

Russell 2000:  1,053

Monday, Sept. 16     (9:20)

   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.

NOTE: Expect  support and resistance levels to change more frequently under adverse  and uncertain conditions  like those we are experiencing presently..

   WARNING: This market  is highly “news sensitive,” with everything at the present negative. Any break for the better in the mid-East, taper, or in the threat of a government shutdown in October will trigger a rally, especially in stocks below, since they have been hammered already.

Resistance/support levelsare “tight” and more easily penetrated than if I gave readers  “general” resi/spt levels.

  Apple(AAPL: $464.90 ) 

Note: Bottom was targeted at $385 for the turn around  Apr. and Jun. 2013 (double bottom). continue to follow

Pattern: Positive, but must firm up ASAP

Resistance:  $469 (sharp change, Icahn waiting as Street adjusts to disappointment in AAPL’s future strategy.

Support:  $454-458 (downward revision)  Made to order for Icahn, and boy do shareholders need help from outside.

AAPL taking hit in face of concerns that its just released low-priced IPhone is too high-priced to compete. That’s just one opinion, many followed Apple’s release, some highly critical, others not so.  I didn’t see this coming, nor should I, if research departments tracking fundamentals in-depth didn’t.  Usually the stock’s behavior signals trouble in advance, which suggests yesterday’s  sell off may have been overdone, especially with Carl Icahn licking his chops at an opportunity to pick up shares at a discount, but he  may let the Street take it a bit lower.

Facebook (FB - $44.31)

Note: Bottom was targeted below $18 for a turnaround Sept. 2012.  Continue to follow.

Pattern: Positive –

Resistance: $44.85

Support: $44.10

Recent strength attributed to Sun Trust Robinson Humphrey’s increase in price target to $55 from $40. Due for a rest, but buyers should re-enter in here.

  IBM ($ 192.17) 

Note: Started coverage  Aug. 7, 2013 after big plunge in stock

Pattern: Neutral, but improved

Resistance:  $193.60        The $194 - $196 area should be tough to penetrate                    

Support:  $191   Be aware that IBM has ranged four times up and down between $185 and $215 over the last two years.

  PulteGroup (PHM- $ 16.52) 

Note: Started coverage Aug. 12, 2013

Pattern: Now positive with big move yesterday

Resistance: $16.95

Support:  $16.20  

First Solar (FSLR:38.22 )

Note: Started coverage: Aug.: 22, 2013

Pattern: Yesterday’s hit  too much, FSLR back to neutral. Needs to hold here

Resistance: $38.40  Resistance $39 - $40 formidable

Support: $38

Target (TGT: 63.76) 

Note: Started coverage Aug: 22, 2013:

Pattern:  Needs to stabilize after yesterday’s return to its base from resistance level.

Resistance: $64.30

Support: $63.75

Hewlett-Packard (HPQ:22.07)

Note: Started coverage Aug. 23, 2013

Pattern: Negative  - at risk of trading lower after being dropped from DJIA

Resistance: $22.15  - steady seller

Support: $21.25 (suspect)

 Sharp drop from $26 created overhead supply (a lid)  $19.85 is possible  after being dropped from DJIA thus triggering selling from funds indexed to the DJIA.

eBay (eBay: $53.82 )  

Note: Started coverage Aug. 28, 2013

Pattern: Positive

Resistance: $53.90

Support:  $ 53.50

Amazon.com  (AMZN: $ 297.92 )

Note: Started coverage Aug. 28

Pattern:  Bullish

Resistance: $299.40

Support:  Support now $296

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

ECONOMIC REPORTS:  BIG, BIG Week for reports.

   For a detailed account of past and current economic reports, including charts go to: mam.econoday.com - www.mam.econoday.com

MONDAY:

Empire State Mfg. Ix. (8:30)    PROJ: Spt. Index  9.0 vs. 8.24 Aug.

Industrial Production (9:15)  PROJ:   +0.5 pct Aug vs. flat July

TUESDAY:

FOMC Meeting begins 

ICSC-Goldman Store Sales (7:45)  PROJ:

Consumer Price Ix.(8:30)   PROJ:   Aug. +0.1 pct.  (ex. food/energy +0l.2 pct vs. 0.2

   pct. July

Housing Market Ix.(10:00)    PROJ:   Sept. index 59 vs  59 Aug.

WEDNESDAY:

Housing Starts (8:30)     PROJ:  0.915 million unit rate in Aug. vs. 0.896 million

   units  July  Permits 0.915  mil. units Aug. vs July’s 0.943

mil. units July

FOMC Meeting Announcement and Forecasts (2:00 pm)

Bernanke press conference (2:30)

THURSDAY:

Jobless Claims (8:30)    PROJ: 341,000 for  week ended 9/14  vs. potentially  

    distorted 292,000 prior week, which may be revised upward.

Current Account Deficit (8:30)   PROJ:   Q2  minus $96.7 billion  vs, $106 billion

   In Q1

Bloomberg Consumer Comfort Ix.(9:45)  PROJ: none

Existing Home Sales(10:00)   PROJ:  Aug.  5.255 million unit rate vs. 5.390 rate

   July, which was up 6.5 pct from June.

Philadelphia Fed Svy Ix. (10:00)  PROJ: Index  for Sept. 10.0 vs. 9.3 in Aug.

Leading Indicators (10:00)   PROJ:  Aug. +0.6 pct

Fed’s Pianalto speaks (11:30) 

FRIDAY:

QUADRUPLE WITCHING FRIDAY !

Fed’s George speaks (12:30)

Fed’s Tarullo speaks (12:40)

Fed’d Bullard speaks (12:55)

Fed’s Kochelakota speaks (1:45)

 

RECENT POSTS:   2013

Sep 4     DJIA  14,833  “What Must Happen for the Bull to Snort”

Sep 5     DJIA  14,930  “ September Taper – Buying Opportunity ?

Sep 6     DJIA  14,937  “Market Wants to Run – Are You Ready ?”

Sep 9     DJIA  14,,932 “Breakout or Fakeout ?  Syria/Fed Taper”

Sep 10   DJIA  15,063  “Easy Does It !

Sep 11,  DJIA  15,191   “Taper Center Stage – What to Expect”

Sep 12  DJIA   15,326   “Fed to Delay Taper Next Week ?”

Sep 13   DJIA  15, 300  “What’s in Line Next Week – Fed Taper,  Larry Summers”

*The DJIA may be impacted more with the replacement of Bank of America (BAC), Hewlett Packard (HPQ), and Alcoa by Goldman-Sachs (GS), Visa (V), and Nike (NKE).  While the change isn’t effective until the morning of trading Sept. 23, the trading by index funds  associated with these changes may distort the averages.

  George  Brooks

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

sensiblesleuth@gmail.com

……………………………………………..

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 equities.com. 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: http://www.equities.com/disclaimer

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