Fed Vice-Chair Janet Yellen did everything possible to assure the Senate Banking Committee she would pursue an accommodative policy if cleared to succeed Fed Chief Ben Bernanke.
Obviously, the Street liked what she had to say. Now that the primary effect of the shutdown/default scare is behind us, the flow of economic reports will have more credibility.
NO SWEAT ?
Assuming Yellen takes over from Bernanke on February 1, it looks like taper is off the table at least until then, unless we get commentary out of the Fed to the contrary.
BEST SIX MONTHS to OWN STOCKS*
You are going to read about this seasonal phenom in coming weeks, especially since November is off to a roaring start.
The six months between November 1 and May 1, have outperformed the six month period between May 1 and November 1 earning the distinction of offering a great opportunity.
It will embolden you to load up for the big kill. Well, that attitude could become the big chill if you are not aware that the six months performance is calculatedbetween these dates without regard for what may happen in the interim.
I don’t dispute the merits of the Best Six Month pattern, I have written about it for years. The record is great and the rationale for it as a seasonal indicator makes sense – the big money is busier investing between November and May than May and November, though this period has offered GREAT trading opportunities as stocks kind of wilt..
MY POINT
This six months period has been interrupted frequently in Q1 by corrections, a good number starting in January. While the DJIA may end up in May higher than it started on November 1, there may have been some rough months in the interim.
For example:
The DJIA was down 6.2% between Feb. 18 and Mar.16, 2011 and 7.6% between Jan. 19 and Feb. 8, 2010, both years when May 1 was higher than the preceding Nov. 1.
The DJIA dropped 27% between Jan.6 and Mar.9, 2009. While the bear market made its final plunge in Q1 of 2009, the market was up 19% between Nov. 20, 2008 and Jan.6, 2009, leading many to believe a new bull market had started.
Realistically, you have to cut these seasonal indicators some slack on beginning and ending dates. Seasonals are a guide, to be used with an open mind.
The Best Six Months worked its magic in the 2011 – 2012 and 2012 – 2013 periods, but it cannot be assumed there will be a repeat in 2014 without a painful correction.
I am now on deadline and must wrap this up. I have studied the price chart for each year going back to 1970 and have compiled the numbers. I just don’t have time now for a detailed summary. I will after next week.
TECH WATCH: BIG DAY WEDNESDAY !
FB +4.5%, PHM +1.6%, FSLR + 2.5%, NKE +1.3%, HPQ + 1.0%, PII + 4.7%, AMZN + 1.9%, P +3.6%
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: $528.16) Positive.
Classic breakout of consolidation pattern on increased volume – classic !
Support $527. Resistance $534 – $536
Facebook (FB: $48.71) Positive
Got just what I was looking for Wednesday – a one-day reversal off support at $46. Support now rises to $48.40. Move into low 50s likely.
IBM (IBM: $182.21) Now positive
Got clipped by selling in the tech sector yesterday but bounced back. Support is $180.80 Resistance $183.
Pulte Homes (PHM: $17.86) Positive
PHM investors should send Fed Vice- Chair, Janet Yellen a thank you note for a strong follow through in their stock yesterday. Yellen assured the Senate Banking Committee she would pursue a accommodative Fed policy if confirmed as Fed chair. Support is now $17.50, resistance is $18.25.
First Solar (FSLR:$64.28) Positive
Strong fundamentals and panicky short sellers prompt one breakout after another. Support rises to $63 – $64. Resistance at $65.80 and that may not last long.
Nike (NKE:$78.64 ) Positive
Late day spike in volume Tuesday was the tip off to Wednesday’s jump in price. Positive action continued yesterday. Stage is set for a move into the low 80s.
Hewlett-Packard (HPQ: $25.07) Positive.
Potential product recall of Chromebook II hammered HPQ yesterday taking it down 5.4%. An immediate rebound will be difficult near-term. Stock could slip a bit more to $24.35. Resistance is now $25.20. Company will have to define the impact of a recall primarily centered on an overheating charger.
Polaris Inds. (PII:134.03) Positive
Corrected Wednesday’s surge with a pullback of 2.18 points. Given it had moved up from $126 five days ago, the drop wasn’t alarming. Stock should find support at $132.80. Resistance is now $135. PII’s ability to plow through formidable resistance yesterday between $130 – $132 was very impressive. May pause here to consolidate its six-pointer. Support is $135.35.
Amazon (AMZN: $367.39) Positive
Raymond James’ Aaron Kessler recently raised his rating to Strong Buy from Market Perform. Breakout was classic following Wednesday’s one-day reversal. Support is $367. Stock looks good for $378.
Pandora Media (P:$29.47) Positive.
Support rises to $29.25 as P pressed to a new high yesterday. Volume could have been stronger, but the price action positive. Should be able to move into the $30 near-term.
THE ECONOMY:
While the economic reports released this week are few in number, they are significant. Though the accuracy of these reports may still be suspect due to the shutdown, the Street will be watching for clues about the economy’s strength, since it will influence the timing of Fed taper. With renewed concern about an early Fed taper, Fed. Chief Bernanke’s speech Wednesday, 7:00p.m. will be parsed for clues. For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
WEDNESDAY:
Fed. chiefBernanke speaks (7:00p.m.)
THURSDAY:
Jobless Claims (8:30) were 339,000 for week ended 11/9 vs. 341 the prior week.
Productivity/Costs (8:30): Productivity for Q3 was +1.9 vs.+1.8 pct. Q2.
FRIDAY:
Empire State Mfg. Svy (8:30) Proj.: Index Nov. 5.5 vs. 1.52 Oct.
Import/Export Prices(8:30) Proj. Oct. -0.5 pct.
Industrial Production (9:15) Proj. Oct. +0.1pct. vs. +0.6 Sept.
Wholesale Trade (10:00) Proj. Sept. +0.4pct.
RECENT POSTS – 2013
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”
Oct 29 DJIA 15,568 “ When Will the Small Investor Plunge ?”
Oct 30 DJIA 15,680 “Don’t Rule Out Fed Taper by Year-End”
Oct 31 DJIA 15,618 “Easy Does It ! Market Nervous, Needs Breather”
Nov 1 DJIA 15,545 “Rally Failure, Correction to Continue ?
Nov 4 DJIA 15,615 “Room to Run – Just Ditch the Blinders”
Nov 5 DJIA 15,639 “Market Crossroads – Which Way ?
Nov 6 DJIA 15,618 “Bulls Hold the Edge, But What About Interest Rates ?
Nov 7 DJIA 15,747 “Early Profit Taking or Warning of a Correction ?”
Nov 8 DJIA 15,593 “Time for the Street to Get Off the Fed Teat”
Nov 12 DJIA 15, 761 “The Economy, Interest Rates, The Fed, Stock Market”
Nov 12 DJIA 15,783 “Get Ready for Year-End Cross Currents”
Nov 13 DJIA 15,750 “Money Manager Dilemma – Your Problem, as Well
Nov 14 DJIA 15,821 “Feeding Frenzy in 2014’s Winners ? Big Day for “TECH
WATCH” Stocks”
George Brooks
“Investor’s first read – an edge before the open”
*STOCK TRADERS ALMANAC: The new annual Stock Trader’s Almanac is off the press. This is a “must,” always has been, if you are a serious investor, or intend to be a serious investor. Visit stocktradersalmanac.com for details
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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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