Retail sales declines in 0.1 percent in September after a 0.3 percent gain in August, generally reflecting a softening in the economy for Q3. The endless ideological bickering in Washington is a poor environment for an economy that is attempting to gain traction.
The Q4 economic reports will even more adversely impacted by more of the same. While it is unlikely the government will be shut down and default brinkmanship revisited in the near future, who can blame any consumer or corporation from withholding spending.
Yet, the stock market chugs on stubbornly, having climbed an unprecedented wall of worry and arrogantly challenging any new negative to “bring it!”
The classic bull cycle includes a phase where aggressive investors ramp up their speculation, borrowing against fixed assets to sate their greed for MORE.
The “little guy” sees all this, and decides buying stocks instead of mutual funds is a faster route to the big bucks and makes the plunge.
We aren’t there yet.
I moved from Connecticut where everyone talks about the stock market to North Carolina where no one talks about the stock market. Believe me, when I hear the accounts of someone making easy money in the stock market, I am standing right next to the exit.
As of October 23, 49.2% of the individual investors polled by the American Association of Individual Investors (AAII) are bullish, 33.2% neutral and 17.6% bearish.
I see that 33.2% in the neutral category moving up to bullish, either they are tormented watching the institutions and savvier investors make money as the market edge higher and higher, or because the economic/political environment improves, or both.
The “I can’t stand it anymore” syndrome at bottoms and tops is what makes it so difficult to buy low and sell high. Investors become so distraught at market bottoms they sell, just when they should buy. At tops they become overwhelmed at the prospect of making the big bucks, they go all-in, just when they should be selling.
We are beginning to see some signs speculation, but a bull market extreme is not there yet.
Any correction will come as a normal adjustment to a temporarily overbought condition, not outlandish speculation.
Investor’s first read– an edge before the open
Russell 2000: 1,117
Tuesday, Oct. 29, 2013 (9:15 a.m.)
STOCKS OF GENERAL INTEREST: I am considering the elimination of this section and offering it in a separate publication on a subscription basis.
I would be able to cover more companies, and would not be constrained by a pre-market deadline. Comments welcome: [email protected]. Include opinion about how you think I could even improve commentary bearing in mind these are NOT buy/sell comments.
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: $529.87) Positive.
Big jump last week was in anticipation of AAPL’s intro of its newest iPad and tablet iPad Air. Friday was a day of rest. AAPL attacked resistance at $528 – $529 yesterday. Its Q3 earnings report released after the close was disappointing and its stock got hit in after-market trading. Gross margins were less than projected, but quarter earnings, though down 8.6% vs. a year-ago beat analysts’ projections, as did estimates for the holiday season. Cooler heads prevailed and AAPL reversed the after-market selloff and is ahead in pre-market trading. Do we really need projected earnings and guidance. Does it matter six months from now what was reported in Q3 ?
Facebook (FB: $50.22) Positive
Last week was a consolidation week which may reflect nervousness about earnings due Oct. 30. However, this may just be a correction to its 8-day surge in early Oct.. While there has been some buying in the low 50s, FB must hold $50 in coming days to head off a further decline, possibly to $48 – $49.
IBM (IBM: $177.35) Negative but probing for support.
IBM is in the early stages of tracing out a base. It may take time. Support is $176. Resistance is now $179. Breaking that, IBM can get to $180 – $182 in a good market.
Pulte Homes (PHM: $18.02) Positive
Investors got the earnings report they were looking for last week pushing PHM across $18.Support is now $17.75 – $17.80. Stock can work higher, though a sideways consolidation would give it more stability.
First Solar (FSLR:$51.48) Positive
Got stopped in its tracks Friday at $54.70 but as expected, found some buyers at $50. Could test $50 again. Earnings due 10/31.
Target (TGT: $64.88) Neutral, but Monday’s action improved pattern.
Buying late Friday penetrated a downtrend line, improving TGT’s ugly chart pattern. TGT got the kind of big buyer it needed at $63.56 yesterday and closed sharply higher. Support is now $64.25, resistance $65.30.
Hewlett-Packard (HPQ: $23.86) Positive.
Friday’s chart improved slightly thanks to some buying that came in late in the day. Looks like the buyer was there again at the close yesterday. Can hit $26 near-term if its earnings report Oct. 26 is well received. We didn’t get an answer Monday, maybe Tuesday’s trading will help. Support is $23.90.
EBAY (EBAY: $51.97) Neutral and turning ugly.
EBAY needed a big-volume move above $52.70 to reverse damage done by management’s comments about the company’s near-term prospects last week. The day started out with a surge, but it met serious selling taking the stock down shortly after the open Friday. Yesterday’s rally failed to hold suggesting a drop to $50.55..
I think there is a credibility problem here as a result of management’s comments about the Holiday season. It would be a good idea if management clarifies its position if it wants to head off more selling.
Amazon (AMZN: $358.16) Positive
AMZN pleased the Street last week with its Q3 earnings report, but it was Raymond James’ Aaron Kessler’s raising of its rating to Strong Buy from Market Perform with a price target of $446 that blew it out. Thursday’s market action suggested a strong move up, but not a “gap” of 22-points at the open. This is the kind of stuff that whets appetites. !! After Thursday’s surge, AMZN went into a sideways consolidation which continued yesterday. A break above $365 gives it a shot at $370 – $378.
I do not own, nor am I short: AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.
Heavy slate of reports this week, however accuracy is
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
Industrial Production (9:15) Sept. +0.6 pct. vs forecast +0.4 pct.
Pending Home Sales(10:00) Sept. down 5.6%, lowest in nine months.
Dallas Fed. Mfg. Ix.(10:30) Oct. index -3.6 down from 12.8.
FOMC Meeting begins
ICSC Goldman Store Sales (7:45) No proj.
Producer Price Ix.: Proj.:Sept. +0.2 pct
Retail Sales (8:30) Proj.: Sept.: zero pct.
S&P Case-Shiller Home Price Ix. (9:00) Proj.: 20 cty HPI +0.7
Business Inventories (10:00) Proj.: Aug.: +0.3 pct.
Consumer Confidence(10:00) Proj.:Oct. ix. 75 vs 79.7 Sept.
State Street Investor Confidence Ix.(10:00) Proj.:
ADP Employment Rpt(8:15) Proj.: Oct.: 138,000
Consumer Price Ix.(8:30) Proj.:Sept.: +0.2 pct.
FOMC Meeting announcement (2:00) No Bernanke press conf. planned
Jobless Claims (8:30) Proj.:for 10/26: 335,000
Chicago PMI (9:45) Proj.:Oct.: ix.: 55.0 vs 55.7 Aug.
Motor Vehicles Sales Proj.:Oct.domestic:11.9 mill-unit rate (total: 15.4 mil.-units)
Fed’s Bullard speaks(8:00)
PMI Mfg Ix.(8:58) Proj.: No data available
ISM Mfg. Ix.(10:00) Proj.:Oct.: ix.: 55.0 vs. 56.2
Fed’s Kocherlakota speaks(11:15)
RECENT POSTS – 2013
Oct 15 DJIA 15,301 “What If We Default ? What If We Don’t ?
Oct 16 DJIA 15,168 “Market Saying “Deal” – A High Risk Bet ?”
Oct 17 DJIA 15,373 “How Much of the “Deal” has the Market Discounted” ?
Oct 18 DJIA 15,371 “No More Wall of Worry for Bull Market to Climb ?”
Oct 21 DJIA 15,399 “Analysis Projects High-Low Range for DJIA”
Oct 22 DJIA 15,392 “Is the Stock Market Vulnerable ?”
Oct 23 DJIA 15,467 “Q3 Earnings – Only Worry In Town ?”
Oct 24 DJIA 15,413 “No Fed Taper in Sight ? Don’t Bet on It.”
Oct 25 DJIA 15,509 “Best Six Months for Owning Stocks”
Oct 28 DJIA 15,570 “Do I Detect Speculative “Fever “ ? If So, What Can Happen
“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.