Now the Scary Part - the Debt Ceiling - Default?

George Brooks |

   I haven’t been worried about the shutdown, as much as about the debt ceiling, which must be raised  to avoid a disastrous government default on certain obligations.

   So far, the Street hasn’t been worried about either. Shutdowns have never done irreparable damage to the economy and stock market in the past, and the government has have defaulted  on its debt.

   The Street may be taking this one too lightly, secure in the knowledge that the stock market has climbed a wall of countless worries over the last five years, why worry about  default ?

    Treasury Secretary Jacob “Jack” Lew warns that the government will run out of money by October 17, having exhausted  all its extraordinary resources.

    Never before have the nation’s two political parties been at such partisan extremes, so the present situation  is not comparable with the past.

   That does not assume the debt ceiling will not be raised in time for the government to issue treasury bonds to fund obligations, however WHAT MUST BE CONSIDERED NOW IS, HOW SCARY WILL IT GET DURING THE NEXT TWO WEEKS AND HOW MUCH DAMAGE WILL THIS FEAR DO TO STOCK PRICES ?

CONCLUSION:

   Uncertainty will yield to fear, as we get closer to the October 17 deadline  Efforts to reach an agreement may cause brief rallies, but I think the direction in stock prices will be south.

   Ugly and scary as it will be, odds favor an attractive buying opportunity.

Note:

The three new additions to the Dow 30 stocks, Visa (V), Goldman Sachs (GS), and Nike (NKE) cost the DJIA 29 points yesterday.  The three stocks they replaced:Bank of America (BAC), Alcoa (AA), Hewlett-Packard (HPQ), the DJIA would only have cost the DJIA 1.19 points.

Investor’s first readan edge before the open

DJIA:  15,129

S&P 500: 1,681

Nasdaq  Comp.3,771

Russell 2000:  1,073

Tuesday, Oct. 1, 2013     (9:16 a.m.)

   TECHNICAL OBSERVATION – STOCKS: NEW FORMAT

   I am streamlining this format in order to include more stocks.

The following are observations based solely on technical analysis and don’t give consideration to fundamentals or changes in brokerage ratings, earnings guidance/projections, breaking news,  which can  have an immediate impact on stocks, justified or not.  The object here is to sense forces of supply and demand for the stock which affect support and resistance levels frequently.

These are not  buy or sell recommendations, and are not stocks I have recommended.

STOCKS OF GENERAL INTEREST:

Note:  Currently, there is the potential for sharp moves in stocks in response to developments in Washington. Under these conditions, support/resistance levels are especially suspect.

I have added a “debt ceiling crisis” risk level for each stock, a price where these stocks could drop to if the debt ceiling decision goes down to the wire.

Apple (AAPL: $476.75) Positive.

Stock is still correcting its 5-day, 40-point move.  Support at $480 couldn’t hold in  yesterday’s soft market, taking it down to $476. Technical pattern orderly. Rally possible. Break above $483 sets stage for move across $490.

Debt ceiling crisis risk: $465

Facebook (FB: $50,23) Positive.

Soft market has put a lid on shares at $51

Debt ceiling crisis risk: $46.50

IBM (IBM: $185.18)Positive.  Broke support at $189 dropping it to the $185 - $186 area. Soft market could take it a point or two lower.Resistance now $188

Debt ceiling crisis risk: $175

Pulte Homes (PHM: $16.50)  Positive.

Should have gotten bigger boost from 8% jump new home sales in August.  Needs to hold above $16.50.  Needs high volume push across $17.50 to reinforce its positive status. Debt ceiling crisis risk: $12.80

First Solar (FSLR:$40.74)Neutral, on verge of turning positive.

Tracing out  an irregular base.  Move across $42 turns stock positive. Support is $40.25. Stock currently featuring sharp moves up followed by a sharp correction but not enough to exceed the prior low. Signs of a aggressive, but patient buyer.

Debt ceiling crisis risk: $36.70;

Target (TGT: $63.98)Negative.

Finally showing some signs of basing as it closed at its high for the day in a down market. Even so, $63 must hold.

Debt ceiling crisis risk: $59.60.

Hewlett-Packard (HPQ: $20.99)  Negative. Stock probing for support in an irregular basing formation. Not a pretty picture, but giving any interested buyer plenty of time to get on board IF fundamentals justify it.  Break below $21 suggests drop to $19.

Debt ceiling crisis risk: $17.90

EBAY (EBAY: $55.79)Positive.

Strong even in  a soft market. Support 55.30.

Debt ceiling crisis risk: $53.60

Amazon (AMZN: $312.64) Positive.

 Finally consolidating its August  - September gain. Move across $320 indicates potential for near-term move to $325 - $330.

Debt ceiling crisis risk: $303.

STOCKS SHOWING  ATTRACTIVE or UGLY TECHNICAL PATTERNS

  ALSO NEW: This is intended to call attention to unusual  technical activity. Will not be followed daily.  I plan to introduce this feature in the near future, even hoped to do so today, but opting for a better time in light of a high risk environment associated with the possible shutdown and debt ceiling crisis.

 

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

 

ECONOMIC REPORTS:  Another key week for reports on the economy.

The big news will be on jobs with the ADP report coming Wednesday and Employment Situation report coming Friday before the market opens.

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

MONDAY:

Chicago PMI (9:45) PROJ.: Index  54.4 for Sept. vs. 53.0 Aug.

Dallas Fed Mfg. Ix.:(10:30)  PROJ.:  Index for Sept. 6.0 vs. 5.0 for Aug.

TUESDAY:

ICSC Goldman Store Sales (7:45)   

Gallup US ECI (8:30): An Economic Confidence Index encompassing  what the economy is doing now and what it is perceived to be doing in future.

PMI Mfg. Ix.: (8:58)   PROJ.: . Ix.  for Sept. 52.9 vs. 52.8 Aug.

ISM Mfg. Ix. (10:00)  PROJ.: Ix.  for Sept 55.0  vs. 55.7 Aug.

Construction Spending(10:00)   PROJ.: Aug. +0.4 pct. vs. +0.6 pct. Jly.

WEDNESDAY:

ADP Employment Report (8:15)   PROJ.: Private payrolls Sept. 180,000

Fed’s Bernanke Speaks (3:00)  

THURSDAY:

Jobless Claims (8:30)   PROJ.:  For week 9/28:  313,000

Bloomberg Consumer  Comfort Ix. (9:45)

Factory Orders (10:00)   PROJ.:   Aug. +0.3pct.   vs. drop of 0.3 pct. Jly.

ISM Non-Mfg. Ix. (10:00) PROJ.: Sept Index 57.0  vs. 58.6 in Aug.

Fed’s Fisher speaks (12:30)

Fed’s Powell speaks (12:45)

FRIDAY:

Employment Situation (8:30)  PROJ.:Sept. 184,000  vs. 169,000 Aug., Unemployment 7.3 pct.

Fed’s Kocherlakota speaks (1:45)

 

RECENT POSTS:   2013

Sep 16  DJIA   15,376  “No Taper ! No Summers ! Selling Opportunity ?

Sep 17  DJIA   15,494  “No Taper= Rally Followed By a Sell off ?

Sep 18  DJIA   15, 529  “Sell the Taper Rally ?”

Sep 19  DJIA   15,676   “Raise Cash for Better Opportunities”

Sep 20  DJIA   15,636   “Raise Cash for October Opportunity”

Sep 23  DJIA   15,451   “Can a Normal Correction Become a Bigger One ?”

Sep 24  DJIA   15,401   “Opportunity Looms as Storm Clouds Form”

Sep 25  DJIA   15,384   “Brinkmanship Starts – What to Do”

Sep 26  DJIA   15,237   “Street Not Worried – Yet  Should You Be ?”

Sep 27  DJIA   15,328  “Prepare for an October Buying Opportunity”

Sep 30  DJIA   15,258  “Makings of an October Buying opportunity”

*Stock Trader’s Almanac – New edition shortly off the press.

  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

Companies

Symbol Name Price Change % Volume
EMBYF Emerald Bay Energy Inc n/a n/a n/a 0

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