Until the Street has enough details on the Fed’s exit strategy, it will have difficulty finding a level that discounts the potential problems associated with taper.
The Fed must be very careful here.
The Street and global markets cannot get the impression the Fed lacks vision and the will to make hard choices on withdrawing from QE, or worse that it is unsure what the repercussions will be.
If the global markets sense the Fed does not have a handle on its exit, the stock and bond markets will take a huge, unnecessary hit.
I am seeing some nasty hits to stocks, downside gaps in prices that suggest the BIG money is on the sidelines. Without their support, an acceleration in selling would have an even greater impact.
I am basically a Fed-supporter, think it did a great job in averting a meltdown, but wonder if they are aware of how edgy financial markets are getting with its indecision.
Right now, uncertainty is being replaced in global financial circles by DOUBT that the Fed really knows what to expect when it unravels QE – that’s scary.
Add to that angst about political polarization in Washington and a change in the Chairmanship at the Fed in January and you have mounting tension.
THIS NOT REALLY ABOUT THE FIRST TAPER, IT IS WHAT COMES AFTER IT AND ULTIMATELY WHAT TO EXPECT WHEN IT HAS WOUND DOWN.
That is what the Fed MUST address, that is the drumbeat financial markets will be marching to in coming months.
A late day rally was cut short yesterday by a plunge at the close.
It will bounce back in early trading today as traders sense a two-thirds correction in the DJIA to the 7.6% June/August surge represents a trading opportunity. The S&P 500 has retraced one-half its 8.2% June/August surge.
Resistance is DJIA 15,088 (S&P 500: 1,662)
Support is DJIA 14,880 (S&P500:1,640)
Insight on taper timing may be gained at 2 o’clock today when Dallas Fed president Richard Fisher speaks.
There is absolutely no room for a rally failure today !
Investor’s first read– an edge before the open
S&P 500: 1,642.80
Nasdaq Comp.: 3,602.78
Russell 2000: 1,021.58
Thursday, August 22, 2013 (9:10 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 recently for the same reason, and am including Pulte, since it has been in a pronounced slide. These are not buy or sell recommendations, and are not stocks I have recommended.
I will most likely focus on quality stocks that have had a decline and seek to assist readers in targeting points where the stock will find temporary support levels and hopefully the final support level from which the stock can turn around.
Again, these are purely technical assessments without consideration for fundamentals.
Apple(AAPL: $502.36 )
Note: Targeted Turn around Apr. and Jun. 2013 (double bottom).
Pattern: Positive, consolidating recent up move.
Support is $501. Could slip to $485 in bad market.
Facebook (FB - $38.32)
Note: Targeted turnaround Sept. 2012
Pattern: Positive – consolidating recent up move between $36 and $39.
Support: slips to 36.25
Note: Started coverage Aug. 7, 2013
Resistance: ran into a seller at targeted resistance$185.45
Support: $184, but I still see $181. Breaking that look for $174
Buying at Monday’s close could stabilize IBM for a while, though overall market weakness is a drag.
Be aware that IBM 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, most likely in this area and possibly at or a smidge below $180.
Right now, there are sellers that must be taken out.
Each point up or down impacts the DJIA by about 13 points.
PulteGroup (PHM- $16.10)
Note: Started coverage Aug. 12, 2013
Pattern: Positive, but test of lows needs to develop in coming weeks to cement upturn.
First Solar (FSLR:$38.55)
Note: Started coverage: Aug.: 22
Pattern: Negative, but can press up near $40 if resistance at $38.65 can be penetrated. Big gap down between $46 and $42 will be hard to work through without unexpected news.
Support: $38, but untested. Break below this level counts to low 30s.
Target (TGT: 66.87)
Note: Started coverage Aug: 22:
TGT down$2.45 yesterday from $73.50 peak in July on Q2 earnings miss.
I do not own, nor am I short AAPL, FB, IBM, PHM, or FSLR
Thursday reports dominate the week.
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com - www.mam.econoday.com.
Existing Home Sales(10:00) Up 6.5% in July to 5.
FOMC minutes made public 2:00 p.m.
Jobless Claims (8:30) Proj.: 329,000 for week ended 8.17, up 9,000 from a week ago.
PMI Mfg Ix. (8:58) Proj.: Index for August of 53.5 vs. 53.7 mid-month.
FHFA House Price Ix. (9:00) Proj.: +0.6 pct June vs. +0.7 pct May
Bloomberg Consumer Comfort Ix. (9:45)
Leading Indicators (10:00) Proj.: +0.5 pct. June vs. +0.2 pct May.
Kansas City Fed Mfg. Ix. (11:00) Proj.: Index rise to +5 in August vs. index of 6 in May
Federal Reserve’s Richard Fisher speaks (2:00)
New Home Sales (10:00) Proj.: 487,000 unit rate in July vs. 497,000 rate in June
RECENT POSTS: 2013
Aug 13 DJIA 15,419 “Homebuilders Ready for a Bounce ?”
Aug 14 DJIA 15,451 “Hindenburg Omen – Worth the Worry ?”
Aug 15 DJIA 15,337 “October Buying Opportunity at Much Lower Levels”
Aug 16 DJIA 15,112 “Fed Pressed for Clarification – Rallies Suspect”
Aug 19 DJIA 15,081 “Will Fed Intervene to Stop the Carnage ?”
Aug 20 DJIA 15,010 “Rally Ahead of Wednesday’s FOMC Minutes”
Ayg 21 DJIA 15,002 “No September Taper = Bad For Stock Market”
“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.
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