Wednesday, August 21, 2013
Charles Nenner: US Headed for Recession and It's 'Going to Be Bad'
Technical analyst Charles Nenner didn’t mince words when asked about the United States facing another recession.
"It's going to be bad," Nenner told Newsmax TV in an exclusive interview.
"It's very scary because we didn't have a lot of growth and when this economic expansion is over, we're going to be in trouble," the founder and president of the Charles Nenner Research Center said. (more)
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Short the Market If This Happens
By some measures, stocks just suffered their worst week in 2013.
Despite that setback, the S&P 500 is less than 3.2% from its
all-time high. Until prices fall further, the weight of the evidence
shows stocks are still in a long-term uptrend.
SPY Nears Support
SPDR S&P 500 (NYSE: SPY) fell for the second week in a row, losing 2.06% last week. Other major market indexes were also down as traders reacted to news that was generally considered to be negative. Among the most important news stories was that a number of companies, including Cisco (NASDAQ: CSCO) and Wal-Mart (NYSE: WMT), lowered their outlook for the rest of the year.
Even good news was bad news to traders last week. Retail sales exceeded expectations, and the number of initial unemployment claims fell to a six-year low.
The problem with good news is that the Federal Reserve has said they will taper their buying and eventually stop purchasing $85 billion worth of long-term bonds every month when unemployment declines sufficiently. Traders are concerned that the market could fall if the Fed stops buying long-term bonds.
Continued good news about the economy could be the cause of a stock market decline.
For now, SPY seems to be near a level where it should find support. The chart below shows a small head-and-shoulders pattern. The "S" on the left side is the first shoulder in the pattern. This forms when prices pull back after trending higher. The "H," or head, is the new high reached after the initial pullback. The "S" on the right is the second shoulder, which forms after a rally fails to reach a new high. The pattern could be labeled differently, but the general idea is the same for any type of topping pattern.
Almost
all chart patterns use the idea of symmetry to find price targets. The
eventual breakout is expected to be equal to the size of the pattern. In
this case, the distance between the bottoms of the shoulders and the
top of the head is equal to about $3.50. This value is subtracted from
the breakout point and a target of $164 is drawn on the chart above. (more)
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SPY Nears Support
SPDR S&P 500 (NYSE: SPY) fell for the second week in a row, losing 2.06% last week. Other major market indexes were also down as traders reacted to news that was generally considered to be negative. Among the most important news stories was that a number of companies, including Cisco (NASDAQ: CSCO) and Wal-Mart (NYSE: WMT), lowered their outlook for the rest of the year.
Even good news was bad news to traders last week. Retail sales exceeded expectations, and the number of initial unemployment claims fell to a six-year low.
The problem with good news is that the Federal Reserve has said they will taper their buying and eventually stop purchasing $85 billion worth of long-term bonds every month when unemployment declines sufficiently. Traders are concerned that the market could fall if the Fed stops buying long-term bonds.
Continued good news about the economy could be the cause of a stock market decline.
For now, SPY seems to be near a level where it should find support. The chart below shows a small head-and-shoulders pattern. The "S" on the left side is the first shoulder in the pattern. This forms when prices pull back after trending higher. The "H," or head, is the new high reached after the initial pullback. The "S" on the right is the second shoulder, which forms after a rally fails to reach a new high. The pattern could be labeled differently, but the general idea is the same for any type of topping pattern.
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Fluor Corporation (NYSE: FLR)
It is very common for me to discuss Head and Shoulders (H&S)
patterns in my articles. An H&S pattern is a reversal pattern that
forms after an uptrend. A textbook H&S pattern starts to form when a
stock rallies to a point and then pulls back to a particular level
(shoulder #1). Next, the stock will rally again, but this time to a
higher peak (head) than the previous shoulder. After forming the head,
the stock will pull back to the same support as the first shoulder did.
Finally, the stock rallies a 3rd time, but not as high as the head
(shoulder #2). The level that has been created by all 3 of the pullbacks
is simply a support level referred to as the “neckline”. The formation
of an H&S pattern warns of a potential reversal of the uptrend into a
possible downtrend. As with any chart pattern, a trader will usually
not want to act on the pattern until the stock “confirms” the pattern.
Confirmation is the break of the key level that has been created by the
pattern. In the case of an H&S, confirmation would be when the
stock breaks the neckline (support).
H&S patterns can also form upside-down and the pattern would be called an Inverse Head and Shoulders. It too is considered a reversal pattern after a downtrend, but it can also be a continuation pattern in an uptrend. The neckline would be a resistance rather than a support.
To see such an Inverse H&S pattern potentially being formed, please take a look at the 1-year chart of FLR (Flour Corporation) below with my added notations:
FLR rallied strongly from November through January and has since
formed what appears to be an Inverse H&S (blue). I have noted the
head (H) and the shoulders (S) to make the pattern more visible. (If it
helps to visualize, imagine this pattern flipped upside down and you
would have a regular H&S pattern.) FLR's “neckline” resistance is at
the $67 level (red). FLR would confirm the pattern by breaking up
through the $67 resistance, and if it does, the stock should be moving
higher from there.
Keep in mind that simple is usually better. Had I never pointed out this Inverse H&S pattern, one would still think this stock is moving higher simply if it broke through the $67 resistance level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break above the key $67 level. If that break occurs, the stock would also be hitting a new 52-week high.
The Tale of the Tape: FLR seems to have formed an Inverse Head & Shoulders pattern. A long trade should be entered on a breakout above the $67 level with a stop placed under that level.
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H&S patterns can also form upside-down and the pattern would be called an Inverse Head and Shoulders. It too is considered a reversal pattern after a downtrend, but it can also be a continuation pattern in an uptrend. The neckline would be a resistance rather than a support.
To see such an Inverse H&S pattern potentially being formed, please take a look at the 1-year chart of FLR (Flour Corporation) below with my added notations:
FLR rallied strongly from November through January and has since
formed what appears to be an Inverse H&S (blue). I have noted the
head (H) and the shoulders (S) to make the pattern more visible. (If it
helps to visualize, imagine this pattern flipped upside down and you
would have a regular H&S pattern.) FLR's “neckline” resistance is at
the $67 level (red). FLR would confirm the pattern by breaking up
through the $67 resistance, and if it does, the stock should be moving
higher from there.Keep in mind that simple is usually better. Had I never pointed out this Inverse H&S pattern, one would still think this stock is moving higher simply if it broke through the $67 resistance level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break above the key $67 level. If that break occurs, the stock would also be hitting a new 52-week high.
The Tale of the Tape: FLR seems to have formed an Inverse Head & Shoulders pattern. A long trade should be entered on a breakout above the $67 level with a stop placed under that level.
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Warren Buffett Loves This Stock: Suncor Energy (NYSE: SU)
He’s not just blowing hot air, either.
For proof, look no further than the performance of his holding company, Berkshire Hathaway (NYSE: BRK.A, NYSE: BRK.B). With Buffett at the helm, Berkshire shares outperformed the S&P 500 60 times between 1965 and 2005.
No wonder why, when Buffett makes a move on a stock, the world watches.
Of course, I’m not just waxing on about Buffett’s greatness. (There’s enough nauseating hero-worship out there as it is.) (more)
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Chart of the Day - H H Gregg (HGG)
They are a leading specialty retailer of premium video products, appliances, audio products and accessories and currently operates seventy nine stores in Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee.
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KB Home (NYSE: KBH)
KB Home operates as a homebuilding and financial services company in
the United States. The company constructs and sells various homes,
including attached and detached single-family residential homes,
townhomes, and condominiums primarily for first-time, move-up, and
active adult homebuyers. It also provides title and insurance services
to homebuyers. As of November 30, 2012, the company delivered 6,282
homes. It has operations in Arizona, California, Colorado, Florida,
Maryland, Nevada, New Mexico, North Carolina, Texas, and Virginia. The
company was formerly known as Kaufman and Broad Home Corporation and
changed its name to KB Home in 2001. KB Home was founded in 1957 and is
headquartered in Los Angeles, California.
To review KB's stock, please take a look at the 1-year chart of KBH (KB Home) below with my added notations:
KBH has formed a nice down-channel chart pattern over the last (3)
months. A channel is simply formed through the combination of a trend
line support that runs parallel to a trend line resistance. When it
comes to trend lines, remember that any (2) points can start a trend
line, but a 3rd or more confirms it. You can see that KBH has (5) points
of channel resistance (red) and (3) points of channel support (blue).
Following the KBH channel can provide you with both long and short
trading opportunities.
The Tale of the Tape: KBH has formed a common pattern know as a channel, in this case, a down channel. A long trade can be entered on a pullback to the channel support, which at this point seems to be around $15, or on a breakout through the channel resistance, currently sitting at $18. Short trades could also be placed at channel resistance or if KBH were to break below the channel support.
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To review KB's stock, please take a look at the 1-year chart of KBH (KB Home) below with my added notations:
KBH has formed a nice down-channel chart pattern over the last (3)
months. A channel is simply formed through the combination of a trend
line support that runs parallel to a trend line resistance. When it
comes to trend lines, remember that any (2) points can start a trend
line, but a 3rd or more confirms it. You can see that KBH has (5) points
of channel resistance (red) and (3) points of channel support (blue).
Following the KBH channel can provide you with both long and short
trading opportunities.The Tale of the Tape: KBH has formed a common pattern know as a channel, in this case, a down channel. A long trade can be entered on a pullback to the channel support, which at this point seems to be around $15, or on a breakout through the channel resistance, currently sitting at $18. Short trades could also be placed at channel resistance or if KBH were to break below the channel support.
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