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 read– an edge before the open
S&P 500: 1,704
Nasdaq Comp. 3,745
Russell 2000: 1,066
Wednesday, Sept. 18 (8:59 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: $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 –
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.
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
First Solar (FSLR:38.48 )
Note: Started coverage: Aug.: 22, 2013
Pattern: Neutral – basing
Target (TGT: 64.38)
Note: Started coverage Aug: 22, 2013:
Pattern: Needs to stabilize after yesterday’s return to its base from resistance level.
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.
Note: Started coverage Aug. 23, 2013
Pattern: Negative –
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
Amazon.com (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: mam.econoday.com – www.mam.econoday.com
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
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)
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 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.
“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.