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Street Must Still Deal With Fed Taper

This is a tricky situation. The market is up sharply primarily because in recent weeks  the Fed has emphatically assured the Street it wasn’t going to withdraw (taper) from its bond

This is a tricky situation. The market is up sharply primarily because in recent weeks  the Fed has emphatically assured the Street it wasn’t going to withdraw (taper) from its bond buying unless the economy gained enough traction to justify it.  It has repeatedly emphasized that taper is not the same as tightening credit.

   As a result the market has shot up 7.5% in less than four weeks.

   All this, right before Q2 earnings are being released.

    There is some risk here. We would be better off if the market had been in sideways consolidation prior to these reports.

    The market cannot afford major a series of   ugly surprises with Q2 reports, worse yet downward revisions in guidance and projections.


 Odds slightly favor the bulls here.  If the report period was going to go badly, I think the market would be heading south by now.

    As I have said frequently, I believe this bull has much further to run, just NOT in a straight line.  We have yet to see an enthusiastic return of the individual investor and small- and micro-caps haven’t yet begun to sizzle.

   I am disturbed by  what happened in June when  both stock and bond markets plunged following Fed chief Bernanke’s reference to  tapering out of QE toward year-end and completely withdrawing by mid-2014. 

   I am more disturbed by the fact the Fed immediately reversed fields countering  Bernanke’s statement and generating a surge in the markets.

   Something artificial about all this. 

   Maybe the market can press on as if  nothing happened. Truth is, the market did not like the idea of tapering  QE has been a significant contributor to the bull market that started in early 2009.

   Whether taper is really not tightening, or not, the markets stand to react adversely when it does start. Or let’s say, when it is perceived by the BIG money that it will soon start.

Investor’s first readan edge before the open

DJIA:  15,545.55

S&P 500: 1,695.53

Nasdaq  Comp.: 3,600.38

Russell 2000:  1,053.39

Tuesday, July 23, 2013         (9:10 a.m.)

   Apple(AAPL: $ 426.31)

No change. Earnings due after the close July 23d.  Stock dropped close to $7 Friday. Resistance is $430 – $432.  Support is $412 unless earnings are a big disappointment, then $398 is a possibility. Price cutting in smart phones stands to adversely impact margins.

FACEBOOK (FB – $ 26.04)
Earnings are due  Wednesday. If Friday’s drop suggested the Street was nervous about  the report, yesterday’s firming indicated otherwise. Support remais at $26.




ECONOMY:  Economic reports continue to reflect a slowly improving economy, not anything that would prompt a change in the Fed’s policy of accommodation. Any acceleration in this tempo will raise concern that the Fed will begin to withdraw from its bond buying program.

   While the Fed believes the Street now “get’s it,” that taper is not tightening, investors cannot be convinced of that, clearly not after the plunge in stock and bond markets after Bernanke’s June 19 comments about tapering starting in Q4 and ending in mid-2014.

   For a detailed account of past and current economic reports, including charts go to:


FHFA House Price Ix.(9:00)  Proj.: +.08 pct May vs. +0.7 pct Apr.

Richmond Fed Mfg. Ix. (10:00)   Proj.:  +0.8 pct July unch. from  June


PMI Mfg Ix. (8:58)    Proj.: 52.8 July vs. 51.9 June

New Home Sales (10:00)    Proj.: 481,000 rate  June vs. 476,000 MAy


Durable Goods Orders (8:30)   Proj.:  +1.5 pct  June  vs. +3.7 pct May. Ex-trans +0.6 pct June

Jobless Claims (8:30)  Proj.:  341,000 (7/20/13)  vs. 334,000 prior week

Kansas City Fed Mfg. Ix. (11:00)  Proj.: unchg  vs. minus an index oif 5 in JUne


Consumer Sentiment (9:55)  Proj.: 84.0 July

  George  Brooks

“Investor’s first read – an edge before the open”

[email protected]


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.




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