What IF the Fed Doesn't Delay Taper?

George Brooks |

stock market today, stocks to buy now, DJIA today, nasdaq today S&P today, dow jones todayFriday, October  17, 2014 8:59 a.m. BEFORE the OPEN.

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Daily: Boiling down fundamental, technical, economic, monetary, fiscal, psychological, and seasonal data into a quick read.

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   Sooo, WHAT IF THE FED DOES NOT DELAY TAPER? Really, how can it? The FOMC does not meet this month, nor does it meet in November, so how is it going to delay taper?

    What happens to stock prices when the Street discovers the Fed isn’t delaying taper now?

    Sure, it can jawbone some more, or maybe call a special meeting in which case everyone would know why, but this damages credibility, not to mention what it can do to stock prices.

   Wednesday, I wrote that the Fed could delay a slide in the market with an extension of bond purchases scheduled to end QE this month, using global economic weakness as an excuse in which case the market would surge "temporarily.”

   It came as no surprise that yesterday morning that St. Louis Fed Bank President James Bullard suggested it “pause on the taper at this juncture, and wait until we see how the data shakes out in December.”

   The market stabilized, recovered most of a big loss and will gap-open today posting 200 Dow points in early trading.

    I am heartened that the Fed is concerned about deflation and economies abroad and their impact on the U.S., but appalled it would send a non-voting member of the FRB out to interfere with a market that is trying to adjust to current and foreseen conditions.

   That creates RISK. If the market needs to go lower to adjust to what is happening to economies abroad, to Russia, to ISIS, and to the Ebola scare, it should do that sooner rather than later.

    A technical rally here is justified, but if it is based on expectations the Fed will delay taper (when it foreseeably can’t), investors rushing in today stand to get  hurt by a plunge when that becomes known.

TODAY:

    Look for a surge at the open, most likely a gap in stocks to prices that may not go higher the rest of the day.

Resistance today starts  at DJIA: 16,332; S&P 500: 1,887; Nasdaq Comp.: 4,271.

    While Fedspeak pumps the market up, the BIG money may dump. Maybe not. I’m not BIG money, nor do I golf with them. Just be AWARE there is risk in what is happening now. It’s still October !

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Investor’s first readDaily edge before the open

DJIA: 16,117

S&P 500:  1,862                               

Nasdaq  Comp.: 4,217

Russell 2000: 1,086

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BULL MARKET RETRACEMENT:

    A one-third retracement of the five and a half year bull market would take the DJIA down  to 13,714 (S&P 500: 1,568), and it can get there in face of the right negatives. A one-third retracement of any major move is not out of the question, just not the norm.

   Good Q3 earnings and projections for Q4 and 2015 could prevent the plunge I see shaping up. Certain comments by Fed officials about interest rates staying low into late 2015 could delay a crunch, but only temporarily.

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TECHNICAL ANALYSIS EACH of 30 DOW INDUSTRIALS   (10/15 close)

By technically analyzing each of the 30 Dow industrials then using the Dow “divisor” to convert the data back into the DJIA, I can get a better read on what is primary support and a secondary support.

  As of the 10/8 close:  Resistance 16,325; Primary Support: 15,722; and Secondary Support: 16,157.

   NOTE: These calculations generally hold for longer periods of time, but need to be changed when the market is hit with excessive volatility.

   The resistance and support levels listed daily may differ, since they are shorter term.

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INTERNATIONAL TENSIONS:

   Ukraine/Russia – Quiet for now, but has the potential to get uglier.

   ISIS/Iraq/Syria – A Euro/Mid-East coalition has formed to counter ISIL. A full-blown bombing mission has been undertaken, which stands to be ongoing. Psychologically, that stands to play well in America, which has been warned of future terrorist activity.  The good possibility of a major war resulting must be considered.

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THIS WEEK’s ECONOMIC REPORTS:

    A heavy week for reports on the economy. For detailed analysis of both the U.S. and Foreign economies along with charts, go to www.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.”

 

TUESDAY:

NFIB Small Bus. Optimism (7:30): Sept. index was 95.3 vs. 96.1 in Aug.

ICSC Goldman Store Sales (7:45): Down 0.7 pct. in Oct. 11 week : Year/year+3.8 pct.

WEDNESDAY:

MBA Purchase Apps/ Refi’s (7:00) Purchases down 1.0 pct. ; Year/year minus 4.4 pct.  Refis up 11 pct Oct 10 week.

PPI-FD (8:30): Up 0.1 pct Sept. vs. unchanged  Aug.

Retail Sales (8:30):  Down 0.3 pct.. Sept vs. gain of 0.6 pct. Aug.

Empire State Mfg. (8:30):  Down 6.17 points Sept. from 5-yr high 27.54

THURSDAY:

Jobless Claims (8:30): Down 23,000 to 264,000 in Oct. 11 week, lowest since year 2000.

Industrial Production (9:15): Rose 1. Pct. in Sept. vs. 0.2pct. decline in Aug.

Philadelphia Fed Svy(10:00): Oct index down to 20.7 from 22.5 Sept.

Housing Mkt Ix. (10:00): Index down 5 points in Sept. to 54

FRIDAY:

Housing Starts (8:30): Rose 6.3 pct. in Sept to a 1.02 million annual rate

Consumer Sentiment (9:55):

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RECENT POSTS:

Sept. 30  DJIA  17,071  Big Move in Market  for Winner of Tug of War

Oct.  1    DJIA  17,042  October – Risk or Opportunity ?

Oct.  2    DJIA  16,804  October Opportunity But Angst in Interim

Oct.  3    DJIA  16,801  Rally Today Must Hold

Oct.  6    DJIA  17,009  Best Six Months for Owning Stocks Looms

Oct.  7    DJIA  16,991  Volatility: Q3 earnings, ISIS, the Fed, Elections

Oct. 8     DJIA  16,719  Extreme Volatility = Risk, but Opportunity

Oct. 9     DJIA  16,994  Bad News is Good News ?  Pure Insanity ! 

Oct. 10   DJIA  16,544  Last Man Standing – Bear – or Bull ?

Oct. 13   DJIA  16,544   A Dangerous Rally – Dow 16,000 this Week ?

Oct. 14   DJIA  16,321  Technical Bounce  - Easy Does It !

Oct. 15   DJIA  16,315 Risk: DJIA 14,666 (-1,655 pts.) by Oct 31

*Stock Trader’s Almanac

A Game-On Analysis,  LLC publication

George  Brooks

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

Brooks007read@aol.com

Investor’s first read, is a Game-On Analysis,LLC publication for which George Brooks is sole owner, manager and writer. Neither Game-On Analysis, LLC, nor George  Brooks is 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. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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