Yesterday, I referred to Tuesday’s market action as “sort of a greenstick fracture.” Wednesday’s plunge makes it a full greenstick fracture, raising the possibility of a more prolonged correction down or sideways-to-down..

The broad based S&P 500 is off 2.7% (intraday) in 4 days wiping out the September 28 to October 1 rally. The DJIA, Nasdaq Comp., Russell 2000 have all broken below the September 28 low from which a sharp, 6-day rally occurred – NOT good.

For two days in a row the DJIA and S&P 500 slipped below my support levels, not by much but enough to suggest the market is under above average pressure. My supports were not that tight.

Only 4 of the 30 Dow stocks were up. Six of the downers accounted for 86 Dow points. Four of S&P500 leaders and 8 of Nasdaq’s 40 leaders were up.

TODAY: Without major news, I can see a technical bounce to DJIA 13,412 (S&P 500: 1438).
More likely though, we should get a drop to DJIA: 13,230 (S&P 500: 1446)
Investor’s first read – an edge before the market opens
DJIA: 13,344.97
S&P 500:1432.56
Nasdaq Comp.: 3051.78
Russell 2000: 826.75
(Thursday, October 11, 2012 (8:05 a.m.)
Note: Early release today, ahead of the Jobless numbers

How do you measure “uncertainty”?

You don’t!

That’s why negatives are usually easier for the market to adjust to. Yes, reality is setting in. While the election results will be known November 7, other uncertainties persist.

EUROPE:
Europe continues to be a cloudy picture, and aside from the fact leaders vow to save the euro, there will be some doubts.
What is new is the S&P downgrade of Spain’s credit rating to a notch above junk and the IMF’s projection for greater economic problems than previously expected.

FISCAL CLIFF ALERT!
Looming as an unknown is what to expect from Congress. Unfortunately, both parties have brought ideological extremes to the negotiating table, so what will happen to the fiscal cliff?

Well, eight Senators meet for three days starting today to continue discussions that have taken place throughout the year on finding common ground for avoiding a plunge over the cliff leading to $500 billion in tax increases and $100 billion in automatic spending cuts.

Odds are small that any announcement by the “8” could be made before November 6, BUT be alert to the possibility that an announcement of a prospective deal could be announced. It would trigger a rally of 200-280 Dow-points.
In fact, it would be very strategic for Governor Romney to make an announcement along these lines to lessen the negative sentiment for the Tea Party members running, who are perceived as obstructionist.

With the contest closer, President Obama may make an announcement about how he intends to bring both extremes together closer to the middle.

The fiscal cliff uncertainty is choking the economy, curtailing spending and corporate decisions. It’s HUGE. I cannot believe something along these lines won’t happen before the election and the first one out of the gate WINS points and maybe the election.

Regardless of affiliation, investors must be alert to this possibility. It wouldn’t have to be a done-deal, just a well-dressed pledge to achieve it.

FACEBOOK (FB – $19.64):
FB slipped briefly below $20 late yesterday, then rebounded on increased volume. It is struggling to hold above $19.80 where it attracted buying September 26. A break below that level raises the possibility it will test its IPO low of $17.55 posted on September 4.

This is one of those situations that appeals to those guy/gals who buy for the long-haul – 3 to 5 years, so some buying can be expected here on down. Since a lot of holders have short-term losses, it may be a candidate for tax-selling before year-end – additional pressure.

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 on May 21, I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, which it did shortly thereafter. Following a rally back into the 30s, FB dropped into the low 20s where on August 2, I forecast a low of $16.88. On September 4, it hit $17.55, its low since its IPO at $38.

George Brooks
*Bloomberg.news
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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.