(By Rich Bieglmeier) Tuesday might prove to be a pivotal day for the stock market in the near-term. The Dow and S&P were well on their way to closing at new, 52-week highs, and the NASDAQ was less than 1% away from making it three-for-three.
However, something not-so funny happened along the way to a breakout green day. Atlanta Fed President, Dennis P. Lockhart, in a prepared speech, told the Latin American Chamber of Commerce and World Affairs Council of Atlanta that more QE is not a "panacea" and could actually do some harm. Uh oh, Wall Street was counting on its free cheese since the August meeting.
The good news is as every movie watcher knows, runaway trains or getaway cars usually do not lose all their momentum after crashing into the first barrier. Lockhart's comments are the first obstruction, but shouldn't stop bulls in their tracks.
iStock believes Wall Street will make at least another, maybe two more attempts to go beyond 2012's peaks – strike three and a correction is likely to follow. However, break on through to the other side, break on through, oww! Oh, yeah! And the bulls gotta keep on risin', Well, risin', risin' I gotta, wooo, yeah, risin' Woah, ohh yeah! (Just about everybody under 40 is scratching their heads now.)
iStock will wait for our momentum, leadership, and market type models to tell us when danger is near. Until then, the trend remains up, and investors might consider acting accordingly i.e. buying dips as long as the earmarks of a downtrend don't emerge.
In the short-term, we see support for the Dow at 13,100, the NASDAQ's first safety-net around 3,030-3,025 and 1,400ish for the S&P 500. So, things shouldn't get too ugly if red lingers for a day or two.
Maybe Wednesday's Existing Home Sales report and the release of the FOMC Minutes can help get stock back on the right track. Additionally, while most of will be sleeping, Chicago Fed President, Charles Evans will speak at a press briefing in Beijing. Mr. Evan's is probably the most gung-ho, let us print, print, print central banker on the committee. His comments could very well be the exact opposite of the Atlanta fed president's remarks.
As for homes, Wall Street expects existing home sales to clock in at a 4.5 million annual rate. The target is a tick up from June's reading of 4.37M, which set a 2012 low. In Dennis Lockhart's speech, he mentioned a firming housing market as one of his reasons further easing is potentially unnecessary. iStock has the sense that he knows something, and we believe the result will be at least on target.
Meanwhile, analysts will be pouring through the FOMC Minutes, searching frantically for clues on the Fed will do, not say, in September's meeting. We don't think anything new will be uncovered, though there will be plenty of interpretation for both bull and bear camps.
Finally, on Wednesdays iStock likes to share a few short-term, trade-able ideas. Today we have six candidates.
Allegheny Technologies Inc. (ATI): suggested target: $36 – stop $33
DSW Inc. (DSW): suggested target: $70+ – stop $62
FactSet Research Systems Inc. (FDS): suggested target: $100 – stop $92.75
First Solar, Inc. (FSLR): suggested target: $27.44+ – stop $22
JPMorgan Chase & Co. (JPM): suggested target: $41 – stop $36.55
The Men's Wearhouse, Inc. (MW): suggested target: $34 – stop $28.75