Investor’s first read – Brooksie’s edge before the open
Thursday, August 9, 2012 8:07 a.m.
DJIA: 13,175.14
S&P 500: 1402.22
Nasdaq Comp.: 3011.25
Russell 2000: 800.16
This market needs more buyers if it’s going to move much higher. So far, they are reluctant to step in aggressively. Fortunately, sellers are on the sidelines, as well. Uncertainty still rules.
Obviously, there is uncertainty about the November elections.
Then too, while European leaders have assured the world they will preserve the euro, “talk” doesn’t quite cut it.
The fiscal cliff is becoming the new negative – mandatory spending cuts of $1.3 trillion stand to be triggered over 10 years starting January 1, 2013.
The deadline for action on the Bush-era tax cuts is also December 31 and political parties are nowhere near agreement.
These uncertainties are reason enough for buyers to remain on the sidelines.
But the political consequences of letting it go to sequestration are unthinkable, so expect Congress to act ahead of the deadline, hough after the election.
That would be bullish, or at least limit a big move down.
Congress will find wiggle room to diffuse the impact of sequestration. News of that would take a huge bite out of the cloud of uncertainty overhanging business and consumer spending and the stock market.
Based on the gap between party platforms, any kind of meeting on common ground is unlikely, BUT is possible, lest we get too discouraged.
TODAY: Support starts at DJIA 13,050 (S&P 500:1388). Breaking that, look for DJIA: 12,970 (S&P 500: 1380). Jobless Claims will come before my release of this post. They aren’t expected to be a game changer.
Facebook ($ ) No change here. Tuesday’s plunge qualifies as the beginning off a test of last week’s $19.82 low. As such it is shaping up as a potential “double bottom” (tech term), but IMHO the bottoms are too close in time, ergo the risk of new lows.
My worst case low for FB is $16.88, however that would have to occur on very heavy volume – 200 million – 260 million shares
I don’t own, nor have I ever owned FB. Generally, I don’t recommend or comment on individual stocks. I started covering FB technically after its IPO, because I felt at $34 it was very vulnerable in face of all the misunderstanding and hype.
ECONOMIC REPORTS:
TUESDAY:
Consumer Credit (3:00p.m.):Rose sharply $17.1 bn in May with student loans a big contributor to to non-revolving loans.
WEDNESDAY:
Productivity and Costs (8:30a.m.): Business productivity declined 0.9% in Q1, revised upward from a gain of 0.5% vs. a gain of 1.2% in Q4, 2011.
THURSDAY:
Jobless Claims (8:30): Rose 8,000 claims in the July 28 to 365,000 bringing the 4-week average to 265,500.
U.S. International Trade Gap (8:30a.m.): Narrowed in May due to lower oil prices. The trade deficit narrowed to $48.7bn from $50.6bn in April.
Wholesale Inventories (10:00a.m.): Rose 0.3% in May bringing the inventory/sales ratio up a smidge to 1.18 from April’s 1.17.
FRIDAY:
Import/Export Prices (8:30a.m.): Import prices dropped sharply in June by 2.7% following a downwardly revised decline of 1.2% in May. Export prices declined 1.7% in the period.
George Brooks
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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.
