I already discussed the Fed’s announcement in the daily notes, so there isn’t much left. A big drop yesterday could have put the S&P 500 in a technical catch-22, where it would have had to go up regardless of the Fed’s announcement. Thanks to the move up, the S&P 500 is in technical neutral territory, so anything is possible.

Let’s look past today, based on whatever happens today:

1. If the markets have a large move up: We are actually well positioned for this, thanks to the recent drop. A large move up could run past today, possibly into next week before becoming overbought.

2. If the markets have a large drop: It won’t take long before we hit oversold conditions, possibly today or tomorrow depending on the size of the drop. After that, we may get a pop, but bearish sentiment could leave it a one-day event.

3. If the markets are flat: This would be highly unusual for a Fed announcement response. However, a flat market would tend to bring the technicals more into neutral territory. The only guess I would have on this would be the markets are looking past the Fed, possibly at tomorrow’s U.S. GDP report. If this is true, then we start the whole game over tomorrow.

I am leaning towards bullishness for today. I will be looking for any dips in the S&P 500 to possibly pick up some UPRO.

The S&P 500 levels to watch today:

UPSIDE: 1793 (January 28th’s high), 1795 (January 27th’s high), 1813 (50 day moving average), 1815 (January 13th’s low), 1820-1821 (2 data points), 1823 (January 6th’s low), 1826-1832 (8 data points and the 20 day moving average), 1835 (January 17th’s low), 1837-1840 (7 data points), 1843-1847 (7 data points), 1849-1850 (January 21st’s high, December’s high and the all-time high), and 1868 (top of the Bollinger Bands).
LAST CLOSE: 1792.
DOWNSIDE: 1791 (bottom of the Bollinger Bands), 1790 (January 24th’s low), 1779 (January 28th’s low), 1775 (October’s high), 1772 (January 27th’s low), 1767 (December’s low), 1746 (November’s low), 1729 (September’s high), 1709 (August’s high), and 1703 (200 day moving average).

There is only one thing every investor needs to know today: The Federal Reserve’s Open Market Committee announcement will be released at 2 pm EST today. With the move up yesterday, equity markets are positioned to react to the Fed, positive or negative. So here is my own view on what to expect, depending on what the Fed does:

1. The Fed tapers QE by another $10 billion (reducing QE to $65 billion): This is what the Fed has been telegraphing for awhile, so it seems to be the most likely announcement. Economic reports haven’t been bad enough, at least on the surface, to warrant a shift in Fed policy. However, the Fed has surprised before, so I only rate this as a high probability. The market reaction could be interesting though. I honestly rate market reaction as a 50/50 possibility, because the logical reaction would be for the markets to react negatively. On the other hand, we have already had a big sell-off, so we could end up with a “sell the rumor, buy the news” response.

2. The Fed tapers a smaller amount, or not at all, or increases QE: The bulls’ dream scenario. The Fed sees economic weakness and decides to slow the taper. I would rate this as a 25% probability. If you see this, I would advise buying early and often.

3. The Fed increases the taper amount (reducing QE by more than $10 billion): The bears’ dream scenario. This could actually crash the markets, so I would rate this as a very low probability.

In other news…

Bloomberg: Obama Offering Retirement-Savings Plan for Workers

Most of President Obama’s State of the Union address last night was irrelevant until we see what he does (he has said a lot of things in previous SOTU speeches that never happened). But I found this part interesting:

President Barack Obama offered more Americans the chance to save for retirement through payroll deductions with a plan for new government-sponsored savings accounts.

The accounts, which Obama announced tonight in a State of the Union Address that concentrated on expanding economic opportunity, will be available to workers who don’t have access to a 401(k) plan, administration officials said.

The “MyRA” accounts, similar to an individual retirement account, will provide “a new way for working Americans to start their own retirement savings,” Obama said in the text of the speech released by the White House.

Under the initiative, workers would be allowed to have a portion of their pay deducted for deposit into an account invested in U.S. government bonds that would be treated for tax purposes as an individual retirement account, administration officials said.

The accounts, set up through the Treasury Department, would have a maximum balance after which money would have to be rolled over into an IRA, the officials said.

I view this as another way for the government to take advantage of the poor and stupid. I would tell anyone who is saving for retirement, but doesn’t have access to a 401k, to start with an IRA first. Once that is maxed out, if they still want to save more for retirement, then a program like this would be useful. But anyone starting their retirement savings with a “MyRA” account is leaving their retirement savings in the hands of the liars and crooks running our country. Would you leave your retirement savings in Al Capone’s hands?

Politico: GOP ready to surrender on debt ceiling

One less thing for the equity markets to worry about:

House Republicans are getting ready to surrender: There will be no serious fight over the debt limit.

The most senior figures in the House Republican Conference are privately acknowledging that they will almost certainly have to pass what’s called a clean debt ceiling increase in the next few months, abandoning the central fight that has defined their three-year majority.

While I don’t approve, I will concede the Republicans are backed into a corner. On the other hand, I am also realistic enough to know if the Republicans controlled both houses, they would still be spending like drunk sailors in a whorehouse…

CZR: -0.30 to $21.15 ( -1.40% , -3.64% overall)–bought at $21.95
GNW: 0.26 to $15.21 ( 1.74% , 62.33% overall)–bought at $9.37
GWPH: 3.36 to $50.39 ( 7.14% , 52.93% overall)–bought at $32.95
LMCA: 0.03 to $134.50 ( 0.02% , -0.51% overall)–bought at $135.19
NNVC: -0.02 to $4.83 ( -0.41% , 90.16% overall)–bought at $2.54
SIRI: -0.03 to $3.63 ( -0.82% , -1.09% overall)–bought at $3.67

OVERALL: +0.59%

On my way home from work (the office closed early because of freezing rain/sleet/snow tonight. I know it’s nuts, but this is the South), I doubled my position in Liberty Media Corporation (LMCA) at $133.16, lowering my dollar cost average to $135.19.

I doubled my position in Sirius XM at $3.61, lowering my dollar cost average to $3.67, which is less than John Malone’s initial offer of $3.68 for Sirius.

The futures are a little strange this morning: Both the Dow and S&P 500 futures are up about 0.5%, while the Nasdaq is down 0.2%. This is clearly the “Apple disappoints” effect, since Apple is a large component of the Nasdaq.

With the FOMC meeting starting today, I would expect markets to be a little quiet. However, the technicals are starting to look like we are approaching a bottom. The McClellan Oscillator is the most obvious, closing yesterday at -54 (-60 is oversold). The last time the MO was this low was in early December: The S&P 500 bottomed out around 1772, before charging up by the end of December to a high of 1849. Both the daily and weekly Williams %R are oversold, and the daily RSI is getting close to oversold at 34 (30 is oversold).

My guess is the markets will bounce tomorrow at whatever the Fed announces. Whether we get a long bounce (bulls return) or short bounce (one or two days) remains to be seen.

The S&P 500 levels to watch today:

UPSIDE: 1790 (January 24th’s low), 1795 (January 27th’s high), 1798 (bottom of the Bollinger Bands), 1812 (50 day moving average), 1815 (January 13th’s low), 1820-1821 (2 data points), 1823 (January 6th’s low), 1826-1832 (8 data points and the 20 day moving average), 1835 (January 17th’s low), 1837-1840 (7 data points), 1843-1847 (7 data points), 1849-1850 (January 21st’s high, December’s high and the all-time high), and 1867 (top of the Bollinger Bands).
LAST CLOSE: 1781.
DOWNSIDE: 1775 (October’s high), 1772 (January 27th’s low), 1767 (December’s low), 1746 (November’s low), 1729 (September’s high), 1709 (August’s high), and 1702 (200 day moving average).

CNBC: Apple drops 5% on weak iPhone sales, revenue outlook

Apple posted quarterly results that beat estimates Monday, but reported weak iPhone sales and handed in a current-quarter revenue forecast that underwhelmed, sending shares lower in extended-hours trading.

The company posted earnings of $14.50 a share on sales of $57.59 billion, surpassing expectations for $14.07 a share on sales of $57.46 billion, according to a consensus estimate from Thomson Reuters.

…During the quarter, Apple said it sold 51 million iPhones, fewer than the 55-million estimate expected by Wall Street analysts. Additionally, the company sold 26 million iPads and 4.8 million Macs.

In addition, the company said it expects to hand in current-quarter revenue of between $42 billion and $44 billion, versus expectations for $46.05 billion.

Is this the end of Apple? Here is something to consider: When Steve Jobs left Apple back in 1985, their high share price for the year was $31.12. When he returned as CEO in July 1997, their high share price that month was $18.12. You can’t replace a Steve Jobs.

I won’t say this is the end of Apple, but I think the downtrend is obvious. They may pop every now and then, but I wouldn’t hold Apple for too long. They are moving back into their niche, which could take a few years, but it will happen.

Fox News: Senate Republicans pitch ObamaCare alternative on eve of presidential address

Let’s look at a new healthcare plan proposed by Republicans:

The GOP proposal, dubbed the Patient Choice, Affordability, Responsibility and Empowerment Act, would repeal the president’s marquee legislative achievement while instituting new reforms the senators say would give states and individuals more flexibility and purchasing power.

…Under the plan, insurances companies would not be able to impose lifetime limits on patients and would be required to allow dependent coverage up to the age of 26, as ObamaCare currently does. The Republican proposal would address the issue of pre-existing conditions by creating a new “continuous coverage” standard that would prevent any individual moving from one insurance plan to another from being denied on the basis of a pre-existing condition so long as that individual was continuously enrolled in a health plan.

The requirements on individuals to buy insurance, and on mid-sized and large businesses to provide it, would be repealed.

…Their proposal calls for the targeted use of tax credits to help individuals buy health care. Employees who work for a small business with 100 or fewer employees would be able to receive a credit while those whose annual income is 300 percent of the federal poverty level could receive an age-adjusted refundable tax credit to buy health coverage. Small businesses would also be allowed to band together and purchase insurance, even across state lines.

To help offset the costs of the plan, the senators would maintain ObamaCare’s cuts to Medicare and also eliminate the unlimited tax exclusion of employer-provided health coverage, instead capping the employer’s tax exclusion at 65 percent of an average plan’s cost.

There is currently no official estimate of the bill’s cost. However the group said it is designed to be “roughly budget neutral” over a 10-year period.

Under the plan, Medicaid reforms would enable eligible individuals to opt out and take advantage of a health credit to purchase coverage, while enrollment would be capped. Federal funds would be distributed to states according to the number of low-income individuals at or below 100 percent of the federal poverty line but would reflect demographic and population changes, according to the senators.

Rounding out the plan would be a series of medical malpractice reforms and disclosure rules that would require insurers to list covered items and services as well as any limitations or restrictions.

The main thing I like is the “continuous coverage” part, which is the economic carrot, as opposed to Obamacare’s “individual mandate” stick.

Unfortunately, it could be years before we see anything like this enacted.

CBS Seattle: Stoner Bowl Website Selling Shirt With Vince Lombardi Trophy Refashioned Into A Bong

You have to love capitalism sometimes:

The way Bryan Weinman sees it, he and his friends already won their Super Bowl bet.

Two weeks ago, the nightclub DJ and a few buddies were sitting at a sports bar in Denver, joking about how funny it would be if the Seattle Seahawks and Denver Broncos — the NFL teams from the two states that have legalized marijuana — made it to the big game.

They decided to plunk down a $44 wager — the fee for registering the Internet domain http://www.stonerbowl.org — just before the Seahawks and Broncos won their conference championships.

It paid off. They’re now using the site to hawk T-shirts and hats celebrating the coincidence. One shirt features the Vince Lombardi Trophy, reserved for the game’s victors, refashioned into a bong. Another features a spoof of the league’s logo, with the letters “THC” — for marijuana’s active compound — replacing “NFL.”

When I think of what is great about America, these guys are what I think about. Hilarious, and a great money-making idea at the same time. Kudos to them!

One other note from the article:

“I’m staying home and will be watching the Super Bowl while I light up my own Super Bowl,” well-known stoner Tommy Chong, of the comedy duo Cheech and Chong, wrote on its Facebook page. The pair released a publicity photo doctored to show Chong in a Seahawks headband and Cheech Marin in a knit Broncos hat.

Anything that brings Cheech and Chong together can’t be all bad…

(hat tip to 420 NewsWire for the pic)

CZR: 0.01 to $21.45 ( 0.05% , -2.28% overall)– bought at $21.95
GNW: -0.08 to $14.95 ( -0.53% , 59.55% overall)– bought at $9.37
GWPH: -2.12 to $47.03 ( -4.31% , 42.73% overall)– bought at $32.95
LMCA: 0.67 to $134.47 ( 0.50% , -1.98% overall)– bought at $137.19
NNVC: 0.05 to $4.85 ( 1.04% , 90.94% overall)– bought at $2.54
SIRI: 0.02 to $3.66 ( 0.55% , -1.88% overall)– bought at $3.73
SPXU: 1.01 to $66.94 ( 1.53% , 2.59% overall)– bought at $65.25

OVERALL: -0.55%

S&P 500 futures are up this morning, but I am not reading too much into it. It looks like we could get a dead cat bounce today, as the bottom of the Bollinger Bands catches up with the falling blades. Don’t be surprised if an early move up fades into the close today, or even completely reverses.

The S&P 500 levels to watch today:

UPSIDE: 1810 (bottom of the Bollinger Bands), 1812 (50 day moving average), 1815 (January 13th’s low), 1820-1821 (2 data points), 1823 (January 6th’s low), 1826-1832 (8 data points), 1835 (January 17th’s low and the 20 day moving average), 1837-1840 (7 data points), 1843-1847 (7 data points), 1849-1850 (January 21st’s high, December’s high and the all-time high), and 1861 (top of the Bollinger Bands).
LAST CLOSE: 1790 (January 24th’s low).
DOWNSIDE: 1775 (October’s high), 1767 (December’s low), 1746 (November’s low), 1729 (September’s high), 1709 (August’s high), and 1701 (200 day moving average).

(hat tip to Dumpaday for the pic)

The world took the weekend off, which is good, because the week ahead looks pretty busy, between earnings and economic stuff:

MONDAY: Apple (AAPL) earnings (what else do you need?).
TUESDAY: Federal Reserve Open Market Committee (FOMC) meeting begins, and earnings reports: Pfizer (PFE), AT&T (T), and Comcast (CMCSA).
WEDNESDAY: FOMC announcement (more taper?), and earnings reports: Facebook (FB), QUALCOMM (QCOM), and Boeing (BA).
THURSDAY: 1st guess/report on 4th Quarter U.S. GDP, and earnings reports: Exxon (XOM), Google (GOOG), Amazon (AMZN), Visa (V), United Parcel Service (UPS), and Altria Group (MO).
FRIDAY: Earnings reports: Chevron (CVX) and Mastercard (MA).

Speaking of Google…

Reuters (via Yahoo Finance): Google to buy artificial intelligence company DeepMind

Google Inc said on Sunday it had agreed to acquire privately held artificial intelligence company DeepMind Technologies Ltd.

Technology news website Re/code, which reported news of the deal earlier, said the price was $400 million, without disclosing where it got the information.

…Founded in London in 2012 by Demis Hassabis, Shane Legg and Mustafa Suleyman, DeepMind uses general-purpose learning algorithms for applications such as simulations, e-commerce and games, according to its website.

If DeepMind’s algorithms work, then $400 million is a small price to pay for the company. Learning algorithms have to be the hardest algorithms to write, so a functional one is like pure coding gold. This purchase is either a steal, or a small waste of money, since $400 million is nothing on Google’s balance sheet.