Investor’s first read– an edge before the open
DJIA: 15,425.51
S&P 500: 1,691.42
Nasdaq Comp.: 3,660.10
Russell 2000: 1,049.20
Monday, August 12, 2013(8:55a.m.)
Sentiment is divided an Wall Street between those who believe Fed tapering would not lead to a significant rise in interest rates and those who do not.
Suggestion by Fed chief Bernanke in mid-June about a fed taper beginning in September and ending in mid-2014 drove interest rates up and stock and bond markets down.
While FRB spokesmen scrambled to prop both markets, the question now is whether the adjustment is over once taper becomes a reality.
Odds favor that the markets have adjusted for the first taper, but the jury is still out for the ones to follow, since they will be based on a rapidly improving economy, which will put upward pressure on interest inflation and rates.
An economic recovery in Europe and Asia would add to pressures.
CONCLUSION:
Look at QE as a necessary rescue effort to avert a meltdown. Also consider the fact the Street became addicted to it for its sense of security.
Now look at the exodus from QE as a withdrawal from this addiction.
I see a great opportunity shaping up, if the Fed keeps its mitts off the kind of market manipulation we saw in June when it rushed in to stop a “normal” adjustment to the taper issue.
Odds favor a downward probing in stock prices as the market seeks a comfort level.
Last Thursday, I picked DJIA 14,250 (S&P:1,542) by early October, but hedged that with, “or worse.”
TECHNICAL OBSERVATION – STOCKS:
The following are observations based on 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, on IBM recently for the same reason and am including Pulte today, since it has been in a pronounced slide. These are not to be construed as buy or sell recommendations.
Apple(AAPL: $454.21)
Under pressure from overall market weakness and obviously some profit taking, AAPL slipped begrudgingly lower. It’s really probing for a level that brings buyers back in force. While $452 offers reasonable support, a slip below $450 is possible in a bad market. Presently, it is trading higher in pre-market trading. If sustained through the day on heavy volume, it may not even visit support at $452.
Facebook (FB – $38.48)
Resistance at $39 is beginning to develop, but can be topped with some high volume buying that would lead it into the low $40s.
After its surge from the mid-20s, FB should consolidate with support in the $35 – $36 area.
IBM ($187.76)
While IBM stabilized around $188, it was unable to close at its high for the day, suggesting there are patient sellers near $189 to keep a lid on its stock.
No change from yesterday which noted IBM is still under pressure following a downgrade by Credit Suisse. The stock is trying to stabilize above $188, but the exodus here stands to break it lower to $182. Foreseeable risk is $174. Institutions may simply sell to free up cash for other stocks with more immediate potential. Each point down impacts the DJIA by about 13 points.
PulteGroup (PHM- $15.67)
Home builders have taken a pasting and Pulte is no exception down 35% from its May high. More slippage is possible, especially if the overall market drops. A dip below $14 is possible, but it would have to have help from a plunging market.
Housing Starts will be b reported at 8:30 a.m.Friday
HOME BUYER BUYING PANIC ?
Mortgage rates rising, home prices rising, inventories decreasing !!
The calendar for economic reports is heavier this week, especially Thursday (see below).
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com
MONDAY:
Treasury Budget (2:00) Proj.: minus $96 billion in July after a surplus of $116 billion in June after a deficit of $138.7 billion in May.
TUESDAY:
NFIB Small Business Optimism (7:30) Proj.: 94.5 July after 93.5 in June
Retail Sales (8:30) Proj.: +0.3 pct July after a gain of 0.4 pct on June. Excl. motor vehicles +0.4 pct
Import/Export Prices (8:30) Proj.: +0.9 pct July
Business Inventories (10:00) Proj.: +0.2 pct
WEDNESDAY:
Producer Prices(8:30) Proj.: +0.3 pct July After jump of 0.8 pct in June. Excl. food and energy +0.2 pct
THURSDAY:
Jobless Claims(8:30) Proj.: 330,000 (8/10) vs. 333,000 prior week
Consumer Price Ix. (8:30) Proj.: +0.2 pct July, same for ex-food/energy
Empire State Mfg. Svy.(8:30) Proj.: 10.0 for Aug. vs, 9.46 July
Industrial Production 9:15) Proj.: +0.3 pct July, Mfg component same
NAHB Housing Market Ix.(10:00) Proj.: 56 for Aug
Philadelphia Fed Svy (10:00) Proj.: 15.0 for Aug. vs. 19.8 in July vs. 12.5 in June
FRIDAY:
Housing Starts (8:30) Proj.: 0.900 million-unit rate. Permits 0.935,000 July. June starts were down 9.9 pct after an 8.9 pct jump in May
Productivity and Costs (8:30) Proj.: +0.6 pct
Consumer Sentiment(9:55) Proj.: 85.5 for Aug vs. 85.1 July
RECENT POSTS: 2013
July 31 DJIA 15,520 “Has the Market Discounted a Fed Policy Change ?”
Aug 1 DJIA 15,499 “Dear Fed, Lay It Out There, We Can Handle It”
Aug 2 DJIA 15,628 “Street Must Taper Out of Reliance on Fed Stimulus”
Aug 5 DJIA 15,658 “August/September Correction Looms”
Aug 6 DJIA 15612 “Market Doesn’t Need Reason to Correct”
Aug 7 DJIA 15,518 “Uncertainties to Plague Market Until September”
Aug 8 DJIA 15,470 “DJIA 14,250 by Early October, or Worse
Aug 9 DJIA 15,498 “Has a Correction Already Started ?”
George Brooks
“Investor’s first read – an edge before the open”
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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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