Look for a mixed open with odds slightly favoring bulls. Apple's sharp rally may whet some appetites with a sharp upmove at the open, a psychological boost since it has been in a tailspin for 5 months.
Resistance is DJIA 14, 020 (S&P 500: 1,515) Support is DJIA 13,950 (S&P 500: 1,507).
This is one of those situations where investors are tormented with a decision – Do I buy more, or do I hold off just in case the sequestration debate gets ugly ?
So far, the stock market is telling us - no sweat. Congress and the White House will find a way to numb the pain of spending cuts, enough so as not to wreck the economic recovery and prospects for re-election in the mid-term elections.
What’s that ? Mid-term elections ? Unfortunately, these guys/girls are always running and the elections in 2014 are huge. Control of the U.S. House is in question. A senseless, ideological donnybrook over sequester is unlikely before March 1.
The rhetoric leading up to the deadline stands to be unnerving for investors, but Congress is likely to kick enough things down the road to ease the damage, yet make some progress on debt reduction.
What does one do ?
Investors hate to miss a move in a stock, or the market. That angst increases with every uptick. Finally the investor can’t stand it anymore and buys, having missed most of the move or getting in just in time for a correction, worse yet a nasty plunge.
My solution has been to buy a partial position, adding to it later. If it runs, the investor is making money, though not as much as if he loaded up. If it drops, he can buy more and lower his average cost.
What this does is, it takes a lot of the emotion out of the decision, keeps risk manageable, but gives the investor options and a chance to make money.
OK, that’s a little too elementary for most of you, but it is worth thinking about at junctures like this.
Investor’s first read – an edge before the open
S&P 500: 1512.12
Nasdaq Comp.: 3,168.41
Russell 2000: 911.29
Thursday, February 7, 2013 (9:16 a.m.)
APPLE (AAPL: $457.35)
Two good days in a row !! Looks like some buyers are patiently picking up shares. It’s hard to say whether there is much short covering, though yesterday’s spike at the open looked like that kind of buying (hurried). While its morning upmove from $453 to $466 got hit by selling, AAPL found support in the $457 area. The time interval between the two lows of Jan. 25 ($435) and Feb. 4 ($442) is too brief to qualify as a classic “double bottom” capable of launching a full-fledged reversal. The stock needs to rise to $478 - $485 to improve the negative pattern. The area of $485 - $500 is going to be very difficult to break through.
I have been targeting $444 as a level that had to hold in order to avoid a test of the January 25 low of $435. While it was broken briefly in the final hour of trading Monday, AAPL rebounded sharply Tuesday.
Minor support is $454. Resistance: $472.
TODAY: AAPL is up sharply in pre-market trading, indicating an attack on resistance at $472.
I do not own, nor am I short Apple’s stock.
FACEBOOK (FB - $29.05)
Monday’s $1.62 drop turned FB’s technical pattern from positive to a weak neutral. Its price stabilized Tuesday and Wednesday though rather unimpressively. I’m keeping resistance at $29.45.
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.
As for Apple, well it is a big-name stock that got shellacked in a short period of time, I wanted to help out targeting a bottom as with FB.
This will be a light week for economic reports. A drop in defense spending and slower inventory growth was responsible for Q4’s paltry annual growth rate of 0.1%, following a Q3 annual rate of 3.1%.
But the Street is heartened by favorable economic data on employment, personal income, consumer sentiment, auto sales construction spending, durable goods manufacturing, and housing.
I am going to list the economic reports below but will not include the numbers from the last report, since those numbers are often revised significantly and therefore are potentially misleading.
I strongly urge you to access the website: www.mam.econoday.com for detailed reports on this week’s calendar and an excellent recap (plus graphs) of last week’s reports. The site does a great job graphically illustrating key indicators.
Jobless Claims (8:30)
Productivity and Costs (*;30)
Consumer Credit (3:00)
International Trade (8:30)
Wholesale Trade (10:00)
*Investment Company Institute data reported by Bloomberg
“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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