Opportunity Looms as Storm Clouds Form

George Brooks |

The market is treading water, adjusting for the potential impact of a threat of a government shutdown as a debate  over a debt ceiling increase rages with the U.S. government’s fiscal year ending September 30.

   The prospects of a shutdown aren’t good, but the divisiveness of a debate stands to be unnerving to investors.

   The Street hasn’t begun to worry about Q3 earnings which will hit in October, as will speculation about an October taper prior to the October  29-30, FOMC meeting.

   Some attention should be directed at a possible pause in the economy at this point, specifically the retail sector. 

   The Fed’s decision not to taper this month was based on concerns about a government shutdown, as well as concern for an adverse impact the June/July jump in mortgage rates had  after Fed chief Bernanke’ June 19 comments about a taper beginning in the fall and ending in mid-2014.

   Since the Fed announced its decision on September 18 not to taper, interest rates have begun to slide. This week features a number of housing related reports (see below), but they won’t reflect the benefits in a drop in interest rates. A recovery in home building, house sales and prices is essential for any acceleration in this economy’s growth. This will be a major factor in the Fed’s taper decision in October.

CONCLUSION:

This bunch of negatives can vanish in a week or two, so investors must be ready to take advantage of lower prices that develop as these negatives begin to spook investors here and abroad. Market looks lower, rallies suspect without big news on the shutdown.

Investor’s first readan edge before the open

DJIA:  15,401

S&P 500: 1,701

Nasdaq  Comp.3,765

Russell 2000:  1,072

Tuesday, Sept. 24, 2013     (9:16 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.

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: $490.64 ) 

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

Pattern: Now neutral  - improved dramatically with blowout weekend sales

Resistance:  $509  Up sharply before the open.

Support:  Rises to $487 

AAPL stunned the Street with the sale of  9 million units  of  its 5s and 5c iPhones over its debut weekend – Q3 revenues are now expected to hit the high end of projections, expect revisions.

 

Facebook (FB - $ )

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

Pattern: Positive

Resistance: $47.50 – breaking that, $49.95

Support: $46.60

Recent strength attributed to Sun Trust Robinson Humphrey’s increase in price target to $55 from $40. Broke out of consolidation Friday on good volume, Monday action positive..

  IBM ($190.99 ) 

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

Pattern: Positive but correvting nice August – September move

Resistance:  $192      The $194 - $196 area should be tough to penetrate                    

Support:  $190.80

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

  PulteGroup (PHM- $16.75 ) 

Note: Started coverage Aug. 12, 2013

Pattern: Positive

Resistance: $17.00

Support:  $16.80  Dropped below $17, must now rebound above $17 to move establish upside momentum

Big beneficiary of the Fed

First Solar (FSLR: $38.78 )

Note: Started coverage: Aug.: 22, 2013

Pattern: Neutral – pattern weakened a bit yesterday

Resistance: $39.80

Support: $38.65  Nice up channel.  Break below $37.60 a warning signal

Target (TGT: $64.40 ) 

Note: Started coverage Aug: 22, 2013:

Pattern:  Needs to stabilize after Friday’s return to its base.

Resistance: $64.50  Still basing, but must hold above $63.50. Retail could be the harpoon for a pick up in the traction of the economy. I sense something not right out there.

Support: $64.00 – Needs buyer ASAP

Hewlett-Packard (HPQ: $21.20 )

Note: Started coverage Aug. 23, 2013

Pattern: Negative  -

Resistance: $21.50

Support: $21 – Pattern is ugly, but some buying showed up yesterday a smidge below $21.  Overhead supply is formidable – stock needs a big buyer, big news, or both. Drop below $20 possible.

 

eBay (eBay: $54.76 )  

Note: Started coverage Aug. 28, 2013

Pattern: Positive – on a roll

Resistance: $56 - $57 in a decent market

Support:  $ 54.30 Consolidating recent gains

Amazon.com  (AMZN: $311.49)

Note: Started coverage Aug. 28

Pattern:  Bullish , but correcting September up move.

Resistance: $315  Breakout to $325 possible with help from overall market

Support:  Support now $308  Bad market  tests $306

 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. Of note, are reports on the housing industry (see below).  Interest rates have dropped following the Fed’s decision “not” to taper this month, but we need a few weeks to see if that triggers a resurgence in home buying and refinancing.

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

MONDAY:

Chicago Nat’l Activity Ix. (8:30)  Index rose to +0.14 from -0.43

PMI Mfg. Ix. (8:58)   Sept. Ix. 52.8 vs. 53.1 end of Aug. New orders slowed

Fed’s Lockhart speaks (9:20)

Fed’s Dudley speaks (9:30)

Fed’ Fisher speaks (1:30)

TUESDAY:

Fed’s Pianalto speaks(8:30)

FHFA House Price Ix. (9:00)  PROJ.:  July +0.7 pct. vs. +0.8 pct. May

S&P Case-Shiller House Price (9:00) PROJ.:    July +0.8 pct.  vs. pct. June.  Year/year + 12.4 pct.

Consumer Confidence (10:00)   PROJ.: Sept. Ix. 80.0 vs. Aug. 81.8

Richmond Fed Mfg. Ix. (10:00)  PROJ.: Sept. Ix. 10.5 

State Street Investor Confidence Ix.(10:00)  PROJ.:  No proj.

WEDNESDAY:

Durable Goods (8:30)  PROJ.:  Aug. -0.5 pct. vs. - 7.4 pct July, New orders Aug. +0.1  pct.

New Home Sales (10:00)  PROJ.: Aug. 425,000 units annual rate vs. 394,000 July

THURSDAY:

Jobless Claims (8:30)  PROJ.: 330,000 for 9/21  vs. 294,000  prior week– distorted by reporting  problems

GDP (8:30) Third estimate Q 2   PROJ.: +2.7% annual rate

Corporate Profits (8:30)  PROJ.: No proj.

Pending Home Sales (10:00)  PROJ.:   Aug. -1.0 pct. vs. -1.3 pct July

Fed’s Stein speaks (10:10)

Kansas City Fed Mfg. Ix.(11:00)  PROJ.: Sept. Ix. 9.0

Fed’s Kocherlakoda speaks (12:15)

Fed’s George speaks (9:15)

FRIDAY:Fed’s Evans speaks (5:45 am)

Personal Income and Outlays (8:30)    PROJ.:  Aug. +0.4 pct.   vs. +0.1 pct. July

Fed’s Rosengran speaks (8:30)

Consumer Sentiment (9:55)   PROJ.:  Sept. Ix. 78.0

Fed’s Dudley speaks (3:00 pm)

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 ?”

  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.

 

 

 

 

 

 

 

 

  

 

 

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