Blog Posts by Jennifer Carinci

The Federal Reserve will hold its last policy meeting of the year next week, and two key issues are expected to dominate the gathering and the market's attention -- the expiration of "Operation Twist" and a potential change in interest rate guidelines.

Implemented in September 2011, Operation Twist was designed to lower rates for mortgages and corporate bonds. The program, which expires at the end of this month, entailed the Fed buying $667 billion (roughly $45 billion per month) in longer-term Treasuries above 6-year durations, while selling the same amount in shorter-term securities under 3-year durations.

The goal of the monetary twist has been to lower long-term rates to fuel consumer and corporate borrowing and spending.

"With Operation Twist ending, that means they've run out of short-dated securities to sell in order to purchase more [longer-term securities], so what they've got to move to now is buying up pure $40 billion per month of mortgage-backed securities [QE3]," says Andrew Wilkinson, chief economic strategist at Miller Tabak. "They probably have to compensate for that loss of $40 [billion] to $45 billion per month."

Rumors of QE4

Wilkinson is touching on concerns that have recently been addressed by various Fed governors. That is, that simply carrying out the third round of quantitative easing is not enough to boost the economy. QE3 is an open-ended program that has the Fed buying $40 billion per month in mortgage-backed securities.

So will the Fed turn Operation Twist into another outright securities purchasing program, essentially becoming QE4? Or are they more confident in the economy given the improvement in the November jobs report?

The market will be watching very closely to see if the Fed changes its tune. The decision on handling Twist's expiration will be very telling as to how the committee views the recovery and how much stimulus will be pumped into the economy in 2013.

Don't look now, but shares of BlackBerry-maker Research in Motion (RIMM) are up over 50% since the start of November.

Several analyst upgrades for RIM have created a splash of confidence that's having a positive ripple effect for the stock price. But the sustainability of the recent rise is contingent upon the success of the BlackBerry 10, expected to officially launch on Jan. 30 and begin shipping in February.

"They have been clowns for the last five years. Let's state that upfront," says Eric Jackson, founder of IronFire Capital. "I just don't think at this point they're going to screw up from here."

Just today, the company launched its BlackBerry 10 Ready Program aimed at helping businesses prepare for the new platform. The BB10 will run on a new operating system and offer keyboard and touch versions of the device.

Until recently, the only position Jackson ever had in RIM was shorting the stock from $70 to $20 a share. He detailed his change of heart in a blog post: "Why I —A Former Short—Just Bought Blackberry's Stock And Think It Can Go to $40".

"The reason why I own it is I'm anticipating no new people migrate to the BlackBerry, but what they do have is 80 million net subscribers," he explains in the attached video. "A lot of lawyers, a lot of investment bankers, finance people, still carry these things around. I'm constantly amazed when I look around and I see people walking around in the street with them."

Shares of Apple (AAPL) are trying to stage a comeback after a rough stretch took the stock into bear market territory last month. The downturn came as no surprise to Breakout regular Paul Schatz, president of Heritage Capital, who has been calling for an Apple sell-off since last April when he predicted a 30 — 50% drop was near.

Apple shares fell as low as $505 on an intraday basis in mid-November, off as much as 25% from the all-time high of $705 hit when the iPhone 5 launched on September 21^st. The stock has since recovered from bear status, but sentiment remains damaged.

Related: Can the Market Recover Without Apple?

"If you're a trader, I think Apple has some upside left in it," says Schatz in the attached video. "But what we saw in that twenty-plus [percent] decline was just the first leg down of a multi-year decline, which I think ends up knocking 50 to 70-percent off the stock."

Schatz sees any pop as an opportunity to sell your position. And if you own a lot of AAPL, in his opinion, it's time to lighten up your holdings or use some options protection.

"If your thesis, like mine, is that long-term Apple is going to be sub-$500 or sub-$400 [a share], then you can't get too greedy on the upside, because the upside is going to be fleeting," Schatz says.

With a company like Apple it's difficult to pull off a short position, but he's not ruling it out.

According to the Stock Trader's Almanac, November is the beginning of the stock market's strongest six-month period. The "Best Six Months Switching Strategy" goes like this: Invest in the Dow and/or S&P 500 between November 1 and April 30 each year, then switch into safer fixed income assets in May.

"We found that most of the market's gains are made from November to April, whereas you either go down or are flat from May through October; hence the sell in May and go away [strategy]," says Jeff Hirsch, editor-in-chief of the Stock Trader's Almanac.

Historically, there's a soft period from May through October, as seen in STA's chart below.

Source: Stock Trader's Almanac

"We like to buy in October and get ourselves sober, even though we didn't get our trigger this year because the market was vacillating quite a bit," says Hirsch. He uses a MACD indicator as a trigger for buy and sell moves. Using the MACD, the DJIA's Best Six Months rises to an average gain of 9.3% versus a loss of 1.2% during the Worst Six Months.

Thanksgiving is coming early this year, and so, too, is the turkey day trade. Next Thursday, November 22^nd, is literally the earliest date that the holiday can fall on, given it's celebrated on the fourth Thursday of the month. Traditionally, the Wednesday before Thanksgiving and the Friday after were strong market days, as the start of the holiday season ushered in a bullish vibe, according to Jeff Hirsch, Editor-in-Chief of the Stock Trader's Almanac. But, he explains in the attached video, the trend is changing.

"What we're seeing is that the week before Thanksgiving has been stronger. The Dow has been up 15 of the past 19 years," he says. Forecasters "have shifted the seasonality where it used to be bullish right around Thanksgiving, to the period before."

Beware of Black Friday

The seasonal pattern has shifted so much that Hirsch actually warns of having too heavy a position in stocks and leaving yourself vulnerable to sell pressure on the day after Thanksgiving -- Black Friday

While the 3% post-election sell-off came as a surprise to many, Jeff Hirsch Editor-in-Chief of the Stock Trader's Almanac saw it coming. According to his historical market tracking data, November is typically a weak month for the broader market after an incumbent president is re-elected. Looking forward, December should pick up steam due to typical year-end behavior. Since 1944, the S&P 500 has posted an average monthly gain of 1.8% for Decembers following an incumbent re-election.

But once 2013 rolls around, there could be cause for concern.

"We've got a sitting president that has won re-election, normally the post-election year is not great, you see a sell-off," says Hirsch. "Sitting presidents winning has not been the greatest performance, it's usually flat to down."

Check out Hirsch's chart below showing the Dow Jones Industrial Average's performance in the year following an election.

Source: Jeffrey A. Hirsch & Stock Trader's Almanac

Further, taking into account political, economic and technical conditions, which include a split

Here come the retailers. After a string of positive consumer data showing confidence at a five-year high and decent same-store sales in October, many of our nation's top retail chains are set to report third-quarter earnings results this week. Forecasts from retailers like Wal-Mart and Target are arguably the best gauges of consumer strength now and the jam packed earnings lineup is sure to bring more clarity moving forward.

Brian Sozzi, chief equities analyst at NBG Productions, knows what he's looking for and it's all about expectations for the key holiday spending season.

"I need that fourth quarter guidance," says Sozzi. "Here's my tell: [despite] all of this positive consumer data we've gotten over the past couple months, these retail stocks continue to go down. So there's a lot of uncertainty out there."

Some of that uncertainty stems from superstorm Hurricane Sandy that battered the East Coast just days before Halloween. Those in the storm's path had a full weekend to prepare and stock up on staples like food, batteries, flashlights, etc. What's concerning to any retail investor is whether these late October expenses will directly deduct from holiday spending.

After a clear and decisive re-election of President Obama, stocks are selling off over 2% in early trading as concerns out of Europe are helping to weigh on investor sentiment. While the election is over, uncertainty about the future of the U.S. and global economies remains at the forefront. For investors like Jim Paulsen, chief investment strategist at Wells Capital Management, simply re-electing a president is not what will restore economic growth moving forward.

Related: Obama Re-Elected, Now About That Fiscal Cliff...

"The best things for investment and the economy are when there's a split power base in Washington, that no one side has all three pillars of power," says Paulsen. Looking back historically, he believes the worst things happen when one party has too much power, pointing to Obama's first two years as President. While the Democrats didn't have filibuster-proof control of Congress, they did have majority rank in the House and Senate.

"In the last four years, the first two under Obama were a lot worse than the second two — in the second two there was more gridlock and split power and the economy came back and the markets went to new highs," he says. "I don't think that's just a coincidence. I really think the private sector is the driver going forward and the government's along for the ride."

In 2009 and 2010, the Obama Administration passed signature legislation including an $800 billion economic stimulus bill, the Affordable Care Act, and Dodd Frank financial legislation. Government spending rose dramatically, the Bush tax cuts were extended, and we inched further along the path towards the fiscal cliff.