After the Fiscal Cliff We Have the Debt Ceiling Debate!

George Brooks  |

It’s all about the “cliff” and the market is saying –“no sweat.” However IMHO, odds favor the market beginning a correction shortly, or on the day a deal is announced.
The correction would be more pronounced if the market has already run up sharply in anticipation of a“deal,” or on the day it is announced.
That’s another way of saying, sell the announcement. I expect this to go all the way the 10:30 p.m., December 31, with a few false starts in the interim.

Like I said yesterday, “Before December 31, expect days when you are absolutely sure Congress and the President are a certain to strike a deal (market up). Expect those hopes to then be dashed by denials (market down).”. The DJIA was up 80 points yesterday on hopes of good news, then closed down for the day.

DJIA: 13,245.45
S&P 500: 1,428.48
Nasdaq Comp.: 3,013.81
Russell 2000: 829.39
Thursday, December 13, 2012 (8:00 a.m.)

Fed chief Bernanke’s press conference did nothing to help stocks; the Street was not impressed by the FOMC’s decision to replace Operation Twist with Treasury purchases at the rate of $45 billion per month. It’s comforting to know the Fed “cares,” but it’s really about enough confidence in the banking and corporate community to lend and hire.

Quadruple Witching Friday hits the Street tomorrow when stock index futures, stock index options, stock options and single stock options expire. In the past, these expires were disruptive to the market, but not so much anymore. It wouldn’t hurt to be cautious about a sharp increase in volatility tomorrow and Mond
APPLE: Needs a big buyer pronto!

There is a big difference of opinion in terms over fundamentals for Apple (AAPL:$539.00), and I am only focusing on the “technical” action of its stock here.
I expected a spike to $554 yesterday, but $548 was the best it could do and it couldn’t hold that, closing off $2.39 for the day, a rally failure.
Volume was below average. If a 23% drop from its September highs cannot attract more buying than that with it selling at 12 times earnings, AAPL may have to go lower to attract buyers. Sellers did step in to put a lid on two attempts to rally, one at the open, the other around 2:30. AAPL needs a buyer now, or a test of November 16, $505 low is in the offing. Unless a stock is totally smashed technically and fundamentally, bargains don’t sit there letting everyone on-board. A break below $505, counts to around $485.

FACEBOOK (FB - $27.58): . There is definitely overhead supply (resistance) between $27.80 and $27.40. This area represents a longer term resistance than those in the last 3 months, since the stock has risen to an area where it broke down sharply in July. While FB recently broke up through $28 to $29, it slipped back and should have trouble moving up past $28.60. Bear in mind this is December and some institutions want to show FB in their Annual Reports now that it has rebounded from the teens, so there will be some buying. At this level, it may encounter some of the 773 million shares from its IPO“lock-up.”
Today on FB: No change.
It will take a major piece of news and big volume to penetrate resistance, but now that FB is not perceived as a “loser,” owing to its 10-point rebound since mid-November, institutions may not hesitate to show it as a holding in their year-end reports. Bulls have the edge. Risk here is a drop to $25.30.
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. I’ll continue technical coverage for a while to accommodate readers.
Note: I am going to list the economic reports but not include the numbers from the last report, since those numbers are often revised and therefore potentially misleading.
I suggest you access the website: www.mam.econoday for details reports on this week’s calendar and an excellent recap (plus graphs) of last week’s reports.
Jobless Claims (8:30)
Producer Price Ix (8:30)
Retail Sales (8:30)
Business Inventories (10:00)
Consumer Price Ix (8:30)
Industrial Production (9:15)
*Stock Trader’s Almanac: The new one is out – get it !
George Brooks
“Investor’s first read – an edge before the open”

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.

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