Recently I warned readers not to take their eyes off this market regardless how hectic the holiday season gets. Yesterday was one reason for that message. Things happen, sometimes swiftly. Stocks that you plan to take profits in can drop quickly. Stocks that you have targeted to buy that are depressed, can notch up 3% to 4% before you can act.
I also breached the possibility of a year-end rally. With the market down, that suddenly seems like a “remote” possibility. Not so. Even if the Fed opts for taper next Wednesday a year end rally is possible. Clearly no one would expect it.
Right now, I am researching the probability of a 6% - 12% correction in Q1 next year. These events can hit without warning, but not last long. A correction could start as early as January. It could be preceded by a year end rally.
JUST TUCK THAT AWAY in the back of your mind so you don’t get blindsidedif the merriment of the holidays spills over into January as you begin to build your 2014 portfolio based on numerous rosy forecasts of stocks that are destined to be the year’s BIG winners.
Any meeting when the FOMC announces a taper would have to be accompanied by a Fed Chair press conference and business summary. January’s FOMC meeting does not have that scheduled. If the Fed were to suddenly schedule a press conference for January, it would be a tip off in advance.
FOMC meetings next six months:
December 17 – 18
January 29 – 30, 2014
March 19 – 20
April 29 – 30
June 17 – 18
July 29 - 30
Yesterday’s jolt wasn’t that much more than many in the recent past, but I it was more profound in individual stocks that weren’t expected to cough up so many points. I sense profit-takers were caught off guard as they saw profits start to lessen and quickly dumped. Nike (NKE – see below) is an example. This is December’s madness. Stay on top of stocks of interest, a lot can happen.
Look for a technical bounce to DJIA15,887 (S&P 500: 1,788) followed by a drop 15,685 (S&P 500: 1,764) today/Friday.
Obviously “news” can change that, but be prepared, it could be an attractive “trading” opportunity.
Investor’s first read– a daily edge before the open
S&P 500: 1,782
Russell 2000: 1,101
Thursday, Dec. 12, 2013 9:20 a.m.
YEAR END UGLINESS:
We have entered the ugly part of year-end trading – accelerated profit-taking, where investors see good profits begin to wear away as others beat them to the punch. At the same time, stocks that have become attractive price-wise due to tax selling/portfolio adjustments begin to sneak up, now that the selling pressure is lifted. Next thing, stocks of your buy list have jumped quite a bit.
Nevertheless, DO NOT take your eye off what is happening, especially to overly depressed stocks. While you are shopping, enjoying lunch-time “cheer,” or scrambling for one thing or another, THINGS WILL be happening. That stock you were planning to buy, but felt there was plenty of time to buy it, could easily rise 3% -4%, even in a down market. It’s happened to me too often.
Just a reminder: Anyone keeping track of the breadth of the market (advances/declines) should realize the year-end maneuvering will distort the numbers, often favoring decliners.
NOT ROCKET SCIENCE !
This doesn’t have to be rocket science. Common sense and sensitivity to the emotions that are driving stock prices is key, because the level of the stock market, and stocks, is a matter of opinion. For proof, look at the varying levels and valuations the market and stocks reach over months, years. Confidence rules – too little, too much, a change for better or worse. Step back, ask, what drumbeat is the market marching to right now ? It would be nice to have a perfect formula for all the calls needed, but that would simply cause everyone to do the same thing at the same time, negating its value.
TIMING – OPPORTUNITY STOCKS New addition planned: alert to stocks with emerging technical patterns with potential.
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: $561.36) Positive.
Thursday’s reversal and Friday’s drop looked like a combination of selling into the news (China/iPhones) and selling into a strong market rally. Monday’s bounce off $560 support improved AAPL’s pattern though Tuesday was disappointing. There is still a seller there at $564 - $566. $560 is the next level where buying came in on six occasions in the past. In a nasty market environment, that level could give way leading to a further drop $556.The overall market is in charge – for now.
Facebook (FB:$49.38) Positive
Already in corrective mode before the overall market took a big hit. Could slip to $48.30 in a soft market. Resistance is $52. Will replace Teradyne (TER) on S&P 500 on Dec.20, which may trigger institutional buying. Watch closely.
IBM (IBM: $175.20) Negative
No change: IBM is still struggling with an irregular base. Overhead supply between $178 and $181 is very formidable. IBM trying to stabilize at $175. Failure indicates a test of $172.60. This is painful to watch. I plan to replace IBM. If I do and it slips below $170 and tumbles in a selling climax, I will pick it up again, seeking to target a bottom, but this isn’t much help to anyone now.
Pulte Homes (PHM: $18.07) Positive
The housing industry must now demonstrate it can gain traction. That may be in the works with the big jump in October’s New Home Sales. PHM should attract buyers in this area. if housing is a “go.” Stock has held twice in this $17.80 area. Failure takes it closer to $1710.
First Solar (FSLR:$54.20) Positive
Still reeling from the bad solar news out of China. Stock needs a credible institutional research report to assure investors FSLR’s fundamentals are not following China’s track. Big volume at the close yesterday suggests a buyer stepped in. If that is not enough to stem the tide of selling, FSLR can spike down to $50.75. Resistance starts at $56.25
Nike (NKE:$76.84) “the inchworm” Positive
Nothing tiny about yesterday’s $2.38 drop. It looks like profit taking has accelerated , though I am still uneasy about retail. This was a big drop for a stock that moves both ways in tiny increments. It did this in October and reversed to the upside. Support is now $75.50. Resistance 78.50.
Hewlett-Packard (HPQ: $26.99) Positive.
No change: Consolidating surge two weeks ago. Held up well in yesterday’s market plunge but support at 27 must hold or HP slides to $25.80 - $26.20.
Polaris Inds. (PII:) Positive
Three straight breakouts in a row, but Tuesday’s spike got hit by profit-taking and yesterday was worse. Should find support at $133.30
Amazon (AMZN: $382.19) Positive
Has been down here a bunch of times, but further weakness in the market could take it to $373. Resistance is $387
Pandora Media (P:27.17) Positive.
Yesterday, I said P was like following a drunk driver. More often than not, P gets hit by sellers every time it jumps sharply. It got hammered yesterday but should find initial support at $25.8. Resistance is $28.5.
Definitely not a stock for light sleepers. Has its lovers and haters.
NOTE: I AM NEITHER LONG OR SHORT ANY OF THE ABOVE STOCKS
A much lighter week this week. The Street will parse words from Fred speakers Monday (see below)
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.”
Jobless Claims (8:30) November 325,000 week end 12/7
Retail Sales (8:30) November +0.6 pct., excl auto: +0.3 pct.
Import/Export Prices (8:30) Nov. -0.8 pct import price, -.03 pct. export prices.
Business Inventories (10:00) Oct. =0.3 pct
Producer Price Index (8:30) Nov. -0.1 pct.
RECENT POSTS - 2013
Nov 25 DJIA 16,064 Fetch the Blinders – Here come the forecasts
Nov 26 DJIA 16,072 Time to Shop for New Winners and Old Winners Getting
Whacked by Profit-Taking”
Nov 27 DJIA16,072 “December Head-Fakes Galore – Raises Risks”
Nov 29 DJIA 16,097 “Stock Market Bubbles Don’t Pop to a Full House”
Dec 2 DJIA 16.086 “Serious Stuff Coming This Week and Next”
Dec 3 DJIA 16,008 “Hunting Season – Be Armed and Ready”
Dec 4 DJIA 15,914 “Holidays, Or Not, DO NOT Take Your Eye Off This Market”
Dec 5 DJIA 15,889 “December’s Two Dilemmas – Watch Your Back”
Dec 6 DJIA 15,821 “No Fed Taper=December Rally – Correction Q1 ?
Dec 9 DJIA 16,020 “Investor Angst Intensifies”
Dec 10 DJIA 16,025 “ Two Big Dates Loom – What to Watch”
Dec 11 DJIA 15,973 “Year End Rally ?
“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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