“And the envelope. Please.” Yesterday’s market action didn’t announce a winner in this tug of war between bulls and bears, but odds still favor the bulls.
That doesn’t call for a major leg up, but the strength in Nasdaq and Russell 2000 issues suggests astute stock pickers will fare well in coming months.
If IBM didn’t drop $6.18 yesterday, the DJIA would have closed unchanged for the day instead of down $41 when the S&P 500, Nasdaq Composite and Russell 2000 were up for the day.
Last Friday it was Visa (V) that distorted the DJIA with a $10.41 rise, adding $67 to the average. Yesterday morning, Big Blue took a pasting following disappointing earnings and to the casual observer it may have looked like the market was heading south. If you want to calculate how much a stock is impacting the DJIA, divide its price change by the DJIA’s divisor now 0.1557159. It changes frequently so google: “wsj djia divisor” to get an update.
As noted yesterday, a second Fed taper doesn’t appear to be an issue, the economic recovery is tracking positive, and international economies are stabilizing.
That leaves Q4 earnings and revisions that result for the rest of 2014, as well as the “technical” picture as swing factors for the direction of stock prices.
After a 177% bull market rise in the S&P 500 and 29% rise in 2013 alone, is this market at risk, or just pausing pursuant to another leg up ?
Usually, a market that is going down to any significant degree doesn’t waste time doing so. If the BIG money had decided to bail out by now, it would have pulled the plug on new buys and dumped aggressively.
While I expect a correction in Q1, and warned it could come as early as this month, time is running out.
Presently, the Street is buying Nasdaq and Russell 2000 stocks and exiting the upper crust blue chips. In time, small and micro-cap issues will get a big play, drawing the more cautious individual investor off the sidelines prior to a bull market top which may be more than a year off.
Resistanceis DJIA 16,395 (S&P 500: 1,847) There is a chance of a rebound today from an early plunge in which case a new high in the S&P 500 is in the cards this week. This attempt to drop will give us a good read on the near-term direction of stocks. A failure by the bears at this point to follow through would be very bullish.
Q4 earnings are flowing in, so watch your back.
Support is DJIA:16,278 (S&P 500: 1,836)
Investor’s first read– a daily edge before the open
S&P 500: 1,844
Nasdaq Comp. 4,243
Russell 2000: 1,181
Thursday, Jan. 23, 2014 9:15 a.m.
I AM REPEATING THE FOLLOWING TO MAINTAIN AN AWARENESS OF THE POTENTIAL FOR A Q1 CORRECTION.
Best Six Months to own stocks:
Over the years the Stock Trader’s Almanac* has expounded on its significant finding that the stock market performs better between November 1 and May 1 than between May 1 and November 1.
The Almanac’s “Best Six” goes back to 1950. The six months is a snapshot between November and May. Many major market advances often start before November, but the point made here is the period between fall and May is where the action is.
Is this going to be another “BEST six months to own stocks ?
The six months between November 1 and May 1, have consistently outperformed the six months between May 1 and November 1.*
With a 7.3% rise in the DJIA since October 31, the Street is now wondering if the market is off to yet another “Best Six Months.” Out of the last 25 years, Nov.1 to May 1, have produced 19 up-years, 3 flats and 3 downers. The best years averaged gains of 11.8% with the best up 25.6% (1998 – 1999).
THE DANGER: over the last 25 years, there have been 14 corrections ranging between 6% and 16% during this November1 to May1 period. Seven of those started in January, two in December and four in February.
TIMING – OPPORTUNITY STOCKS
The following are based on technical analysis only and are not to be taken as buy or sell recommendations, but as one of many factors that must be considered in the decision process. Comments do not take into consideration earnings reports, or changes in institutional ratings, company guidance. Technical analysis is based on one’s interpretation of the impact buying and selling have on the price of a stock and is therefore not an exact science. News and events can change an interpretation instantly.
Apple (AAPL: $550.94) Positive
Icahn is back with rhetoric after buying more stock. Resistance is $555.60, support $548..
Facebook (FB:$57.51) Positive
Got hit by a seller after posting new 52-week high of $59.31. Resistance is now $58, support $56.6.
IBM (IBM:$182.25) Positive
Crushed by disappointing earnings and outlook. Now testing $181 level for buyers.
Pulte Homes (PHM: $19.63) Positive
Found support and a big buyer. Support now $19.40 and resistance $19.90
First Solar (FSLR:$52.04) Negative
Goldman Sachs really skewered this one when it downgraded it to a sell from a buy. May be forming double bottom above $50. A push above $54 would improve its technical pattern. Must get past resistance between $52.50 and $53 first..
Nike (NKE:$73.50) Negative –
Technical pattern getting uglier. Needs big buyer or NKE slips to low 70s.
Hewlett-Packard (HPQ:$29.84) Positive.
Off for the day, but pattern suggests low 30s. Support at $29.50 must hold.
Polaris Inds. (PII:$141.36) Positive/Neutral
Introduction of new off-the-road vehicle launches PII off critical support. New support is $139.60, resistance $142
Amazon (AMZN: $404.54) Positive
Stalled after hitting new 52-week high $408. Could slip to $402.
Pandora Media (P:$34.62) Positive.
Slip to $32 - $33 area with profit taking after a big run a good possibility.
TECHNICAL ANALYSIS ALERT LIST
The following is a “Technical” alert list, stocks that have indicated an improved technical pattern. I will not follow up in detail like the stocks above. These are not buys or sells, but simply alerts that their technical pattern is improving. Normal intraday fluctuations can offer a lower price than that listed here. Positive patterns can be interrupted by corrections.
Warning: An improving technical pattern can be reversed instantly by negative commentary from the Street, broker downgrades, etc. These are “snapshots” at a given time. Good timing can target pinpoint lower prices in some cases. Most stocks are technically attractive because they sketched out a positive upbeat pattern. Some will be because they are showing signs of rebounding from a depressed condition. If after additional due diligence you decide to buy any of these stocks, always protect yourself with a stop sell. NOTE: Yesterday, I have noted price levels where I thought these stocks should encounter buying (support). But the intensity of the weakness in the overall market can take them much lower. While lower prices can make a stock more attractive, a decline can be a way station en route to yet lower prices, especially if the overall market is in a tailspin. A break below these support levels can eliminate a stock from this list.
Then too, delisting can occur if a stock becomes fully priced or its technical pattern deteriorates.
Align Technologies (ALGN:$62.67) Listed here (12/23) at $57.03. Due to a one-day reversal Tuesday with resistance now at $64, ALGN is no longer technically attractive (1/22)
Gentex (GNTX: $34.08) Listed here (12/23) at $32.64. Support: $33.80
Netease (NTES: $81.24) Listed here (12/23) at $74.51. Reversed after hitting 52-week high $84.35. Support: $80.50
Spirit Airlines (SAVE: $51.22) Listed here (12/23) at $46.06. Support: $50.70
Valeant Pharm. (VRX: $136.88)Listed here (12/23) at $112. No longer technically attractive after a big run up (1/22)
Dycom (DY:$29.22) Listed here (12/23) at $28.05. Support: $29.
Cognex (CGNX: $38.70)Listed here (12/23) at $36.09. Support $38.30.
Salex Pharm. (SLXP: $100.05) Listed here (12/23) at $87.61. Odds are it can run further, but unattractive due to big run up (1/22).
Natus Medical (BABY:$25.76) Listed here (12/24) at $22.80. Support: $25.60
Sierra Wireless (SWIR:$23.54) Listed (12/24) at $22.33. Support: $23.30
RPM Int’l ($42.46) Listed here (1/13/14) at $43.09. Technical pattern weakened Friday and Tuesday. No longer attractive (1/22)
Silicom Ltd (SILC:$46.85) Listed here (1/13/14) at $46.44. No longer technically attractive after inability Tuesday to top Friday close (1/22).
Bitauto (BITA: $38.20) Listed here (1/13/14) at $36.44. Support: $37.40
Avery (AVY: $52.14) Listed here (1/13/14) at $50.88. Support: $51.80
Alexion Pharm.(ALXN:$140.75) Listed here (1/13/14) at $135.21.Break below $140 and ALXN becomes technically unattractive.
NOTE: I AM NEITHER LONG OR SHORT ANY OF THE ABOVE STOCKS
While the number of economic reports is light, there are several key ones, especially those for housing on Thursday
For detailed analysis of both the U.S. and Foreign economies along with charts, go towww.mam.econoday.com. Also included is an explanation of each indicator. If you want to know when the next Employment report or any other key report will be released that info is also there under “event release date.
ICSC Goldman Store Sales (7:45)
Jobless Claims (8:30) down 1,000 to 326,000 for week ended 1/18.
PMI Mfg. Ix. (8:58) Proj: January index 55 vs. 55 Dec.
Existing Home Sales (10:00) Proj: Dec 4.900 million rate vs unch from December. Year-on-year was a minus 1.2 pct.
FHFA House Price Ix. (10:00 Proj: Nov. +0.4 pct. vs a +0.5 pct. Oct.
Leading Indicators (10:00) Proj: Dec. +0.1 vs. +0.8 pct. Nov.
Jan 2 DJIA 16,504 A Raging Bull, but Corrections Offer Opportunities
Jan 3 DJIA 16,441 More Downside in the Market ?
Jan 6 DJIA 16,469 Correction or New Up-Leg ?
Jan 7 DJIA 16,425 Market at Key Crossroad
Jan 9 DJIA 16,462 Bull/Bear Battle Continues – Toss Up, but…
Jan 10 DJIA 16,444 Stocks: Sharp Run Up, Or Down in January ?
Jan 13 DJIA 16,437 What’s Needed to Trigger a Surge or Slide in Stocks
Jan 14 DJIA 16,237 How Ugly Can This Correction Get ?
Jan 15 DJIA 16,373 Correction ? Not So Fast, Says Nasdaq
Jan 16 DJIA 16,481 Stock Pickers’ Market – Rewards, Risks
Jan 17 DJIA 16,417 Stock Pickers’ Market – Where to Look
Jan 21 DJIA 16,458 Key Day in the Market – and Why
Jan 22 DJIA 16,414 Burden of Proof on Bears
“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.