Sell the Taper Rally?

George Brooks |

The Fed will announce its decision on taper today at 2:00 p.m., as well as its forecast for the economy, inflation and unemployment. Fed chief Bernanke’s press conference begins at 2:30.

   Bloomberg News recently polled 64 economists, 33 expect a $5 billion or less taper, 31 expect a taper of $10 billion, or more.

   I think the Street should consider the possibility of “no-taper” this time around in light of a sharp rise in mortgage rates to (30-yr. 4.57%), which has crimped the recovery in the housing industry. Historically, that is not high, but coming out of the worst recession since the 1930s, led by a monster crunch in the housing industry, it is upsetting.

   Housing Starts reported today for August were not reassuring at 891,000, up 0.9 percent over July, permits were down 3.8 percent.


   Does  taper really matter ?

   Not so much whether it is for $5 billion, or $10 billion, but that it is a change in a long-standing Fed policy, and if the economic numbers don’t justify it now, they better in the near future.

   As soon as the Street stops worrying about the first taper, it will start worrying about the next, and in time, the last.

   Tomorrow, Fed’s Pianalto speaks at 11:30, and Friday between 12:30 and 1:45, the Fed’s George, Tarullo, Bullard, and Kocherlakota Speak.

   Also tomorrow, we get Jobless Claims, Existing Home Sales, the Philly Fed Survey, and Leading Indicators (see below).

   On the horizon, there will be a prospective government shutdown, Syria (off and on), and corporate earnings.

   The market has risen  5% in 10 days, suggesting a certain amount of risk at these levels, and more so if it rises sharply from here.

   There is a good chance the market will move up sharply in response to the Fed’s decision, which would provide some investors with a good opportunity to lock in some profits, and/or raise cash for a better opportunity in a month to six weeks.

Investor’s first readan edge before the open

DJIA:  15,529

S&P 500:  1,704

Nasdaq  Comp. 3,745

Russell 2000:  1,066

Wednesday, Sept. 18     (8:59 a.m.)


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: $455.32 ) 

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

Pattern: Now neutral  and once again in a tailspin.

Resistance:  $459 held yesterday, though buying wasn’t heavy.

Support:   New support $442 - $444 wasn’t reached before a buyer showed up, which confirms what I expected, that Icahn would be buying. Can’t confirm that, but I expected him to let the Street mug the stock to an attractive point.

The Motley Fool investment letter  attributes AAPL’s problem to : “Since their introduction, both the iPhone and iPad have been the best products at the best price points….In the last year, the market has shifted.  Now Apple’s products appear to be overpriced compared to their rivals and they aren’t necessarily better.” Clearly a case where management has decided to play “prevent defense,” ie. try not to lose a dominant position. You have to play the game that got you there !

Facebook (FB - $45.07)

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

Pattern: Positive –

Resistance: $49.90

Support: $44.30

Recent strength attributed to Sun Trust Robinson Humphrey’s increase in price target to $55 from $40. Is now correcting big $26 to $45.62 move that started in July.

  IBM ($192.16) 

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

Pattern: Neutral, but improved

Resistance:  $193.00        The $194 - $196 area should be tough to penetrate                    

Support:  $190.60 Be aware that IBM has ranged four times up and down between $185 and $215 over the last two years.

  PulteGroup (PHM- $17.00) 

Note: Started coverage Aug. 12, 2013

Pattern: Positive but Taper decision could move it sharply one way or another

Resistance: $17.26

Support:  $16.90

First Solar (FSLR:38.48 )

Note: Started coverage: Aug.: 22, 2013

Pattern: Neutral – basing

Resistance: $38.60formidable

Support: $38.15

Target (TGT: 64.38) 

Note: Started coverage Aug: 22, 2013:

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

Resistance: $64.45

Support: $63.75 held, new support is $64.25 There are sellers at $64.40 and buyers at $63.90. A break above resistance counts to $67; a break below support calls for a drop to the low 60s.

Hewlett-Packard (HPQ:21.67)

Note: Started coverage Aug. 23, 2013

Pattern: Negative  -

Resistance: $21.82

Support: $21.45 Early day selling was met by buyers a shade below $21.50

 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: $53.65)  

Note: Started coverage Aug. 28, 2013

Pattern: Positive – on a roll

Resistance: $56 - $57

Support:  $ 54.30  (AMZN: $304.17 )

Note: Started coverage Aug. 28

Pattern:  Bullish , but correcting September up move.

Resistance: $310 - $312

Support:  Support now $300

 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: -


Empire State Mfg. Ix. (8:30)  Sept. Index  6.3 down 2.4 pts

Industrial Production (9:15)   +0. pct Aug vs. flat July. Manufacturing up 0.7 pct. vs. drop of 0.4 pct July.


FOMC Meeting begins 

ICSC-Goldman Store Sales (7:45)  Down 1.6 pct. for week ended 9/14

Consumer Price Ix.(8:30)    Sept. +0.1 pct. vs. gain of 0.2 pct July

Housing Market Ix.(10:00)   Sept. unchanged at 59


Housing Starts (8:30)    August was up 0.9 pct. to 891,000 vs. 0.883 million

   units  July  Permits 0.918  mil. units Aug. down 3.8 pct.

mil. units July

FOMC Meeting Announcement and Forecasts (2:00 pm)

Bernanke press conference (2:30)


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) 



Fed’s George speaks (12:30)

Fed’s Tarullo speaks (12:40)

Fed’d Bullard speaks (12:55)

Fed’s Kochelakota speaks (1:45)


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

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

*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”


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 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:


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