This is a greenstick fracture on the cusp of becoming a “full” fracture with some significant downside risk.
Before piling on along with other bears be aware that these are the conditions that may prompt the Fed to dispatch its “FIX-IT” brigade to calm fears and assure the Street that a seamless transition outta QE is in the offing, nothing to sweat..
I have been short-term bearish, but all too often a slam-dunk like this is interrupted by a rally (though temporary) generated by news or a statement from the FRB or government.
This is a good time for investors to start preparing a list of what they want to buy and generally, where they want to buy it, even though the opportunity may not develop for a month or six weeks.
Confusion is rampant at key buying junctures and the best prices are difficult to catch. Think ahead.
Three uncertainties over hang the market now. The obvious one is when will the Fed begin taper ? Once begun, what will its affect be on expectations for interest rates in the future ? Finally, How disruptive will an attempt to shut down the government be in coming months ?
I have said I see a drop to DJIA 14,425 by early October, or worse. I still see that, but am a bit wary of what the Fed may do to stabilize the market in the interim.
I also see the potential for a great buying opportunity late September or October.
Investor’s first read– an edge before the open
DJIA: 15,337.66
S&P 500: 1,685.39
Nasdaq Comp.:3,669.27
Russell 2000: 1,047.80
Thursday, August 15, 2013 (9:05 a.m.)
TECHNICAL OBSERVATION – STOCKS:
The following are observations based on 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 recently for the same reason, and am including Pulte, since it has been in a pronounced slide. These are not to be construed as buy or sell recommendations.
These are not stocks I have recommended.
Apple(AAPL: $498.50)
Some computers were probably programmed to sell at $500, or perhaps some traders locked in profits after a big 3-day run. Support looks like $487 – $491.
Carl Icahn tweeted he has a large position in AAPL with a suggestion of more to come. News sent the stock beyond my projected resistance of $480. Icahn met with AAPL CEO Tim Cook yesterday. Icahn will undoubtedly pressure Cook to put the company’s idle cash to work most likely through stock buybacks. Hmmm, Wouldn’t that even enhance the value of Icahn’s position further ?
Facebook (FB – $36.65)
No change here.
A break below $38 support triggered selling yesterday. Support looks good in the $35 – $36 area, but after yesterday that may have to be lowered to $33 – $34 FB had a 48% run in less than three weeks. Profit taking is normal after a sharp rise. A 50% retracement would bring it back down to $33. Technically, though that is a bit much.
IBM ($187.53)
This is not at all pretty. Stock needs an angel, if it is going to hold above $187 support. Breaking that counts to $181 and possibly $174. But, this stock 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, mostlikely in this area and possibly at or a smidge below $180.
Each point up or down impacts the DJIA by about 13 points.
PulteGroup (PHM- $15.11) WATCH closely, turn possible.
. Housing Starts will be reported at 8:30 a.m., Friday. A bad report would likely trigger a selling climax and an opportunity for investors on Friday or Monday at the open possibly below $13.60.
The homebuilding stocks are down sharply since May. Home builders have taken a pasting and Pulte is no exception down 35% from its May high. More slippage is possible, especially if the overall market drops. I can’t get too bearish on this industry since its stocks have been hammered, PHM down 35% since May. Yes, mortgage rates have jumped, but are still historically low. House prices are rebounding and inventories are low. That spells pressure – pressure to buy a house before rates and house prices rise further.
ECONOMIC REPORTS:
Thursday reports dominate the week.
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com
MONDAY:
Treasury Budget (2:00) July’s budget deficit for July was $97.6 billion. The fiscal year deficit is now $607 billion, down 38% from a year ago.
TUESDAY:
NFIB Small Business Optimism (7:30) Edged up slightly in July (+0.6 points to 94.1.
Retail Sales (8:30) Excluding auto and gasoline, retail sales rose 0.5 pct in July.
Import/Export Prices (8:30) Proj.: +0.9 pct July
Business Inventories (10:00) Inventories (ex. autos) were flat in June.
WEDNESDAY:
Producer Prices(8:30) July prices were unchanged after jump of 0.8 pct in June. Excl. food and energy +0.2 pct
THURSDAY:
Jobless Claims(8:30) Declined 15,000 to 320,000 (8/10) vs. 333,000 prior week
Consumer Price Ix. (8:30) Increased +0.2 pct July vs. gain of 0.5 pct in June
Empire State Mfg. Svy.(8:30) Proj.: slipped to 8.25 in Aug. vs, 9.46 July
Industrial Production 9:15) Proj.: +0.3 pct July, Mfg component same
NAHB Housing Market Ix.(10:00) Proj.: 56 for Aug
Philadelphia Fed Svy (10:00) Proj.: 15.0 for Aug. vs. 19.8 in July vs. 12.5 in June
FRIDAY:
Housing Starts (8:30) Proj.: 0.900 million-unit rate. Permits 0.935,000 July. June starts were down 9.9 pct after an 8.9 pct jump in May
Productivity and Costs (8:30) Proj.: +0.6 pct
Consumer Sentiment(9:55) Proj.: 85.5 for Aug vs. 85.1 July
RECENT POSTS: 2013
July 31 DJIA 15,520 “Has the Market Discounted a Fed Policy Change ?”
Aug 1 DJIA 15,499 “Dear Fed, Lay It Out There, We Can Handle It”
Aug 2 DJIA 15,628 “Street Must Taper Out of Reliance on Fed Stimulus”
Aug 5 DJIA 15,658 “August/September Correction Looms”
Aug 6 DJIA 15612 “Market Doesn’t Need Reason to Correct”
Aug 7 DJIA 15,518 “Uncertainties to Plague Market Until September”
Aug 8 DJIA 15,470 “DJIA 14,250 by Early October, or Worse
Aug 9 DJIA 15,498 “Has a Correction Already Started ?”
Aug 12 DJIA 15,425 “Taper, A Withdrawal Process From Addiction”
Aug 13 DJIA 15,419 “Homebuilders Ready for a Bounce ?”
Aug 14 DJIA 15,451 “Hindenburg Omed – Worth the Worry ?”
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.
