I tend to opt for caution when extended up moves lure the Street into a false sense of security, but get more aggressive when stocks plunge to the point the Street opinion is decidedly dour.
As a result, I think the current move up will give way for an unexpected correction extending well into September. Just how big a correction will be determined by what kind of news hits the market after a 5% correction has taken place.
No new negatives suggest a quick recovery. New negatives, suggest a correction in excess of 8% and as much as 12%.
Currently, the charts look explosive, which if followed by more upside would provide the BIG money an opportunity to lock in profits.
Both stock and bond markets got a boost from Friday’s disappointing Employment Situation report which at 161,000 new private sector jobs fell short of expectations and short of the optimists looking for a good enough number to encourage the Fed to begin taper as early as September this year.
Long interest rates took a hit as a result, indicating speculation was misplaced by those who were betting on better job numbers pursuant to Fed taper beginning this fall.
Federal Reserve speakers hit the speaking circuit today, tomorrow and Wednesday, but I doubt we will learn anything new.
A Bloomberg News survey of analysts reveals expectations are for a 3.3 percent increase in Q3 S&P 500 earnings followed by a 9.9 percent increase in Q4 earnings.
All that can change, but if anywhere near accurate, the market has more than the Fed’s continuing QE to hang its hat on.
The S&P 500 sells at 15.5 times “estimated” earnings versus an average 13.9 times over the last five years, though Bloomberg doesn’t specify which estimate is used for its calculation.
Investor’s first read– an edge before the open
S&P 500: 1,709.67
Nasdaq Comp.: 3,689.58
Russell 2000: 1,059.81
Monday, August 5, 2013 (9:05 a.m.)
TECHNICAL OBSERVATION – STOCKS:
Alert: I have successively accomplished my goal of helping readers navigate through the plunges in both AAPL and FB and subsequent recoveries. .I may soon drop coverage and either pick up other fallen angels, or begin the technical tracking of stocks on the move.
Apple(AAPL: $462.09 )
AAPL has chewed through resistance at $457 and attacked resistance between $460 and $470. Support keeps rising under the stocks low for the day and is now $451.AAPL looks higher.
FACEBOOK (FB – $37.97)
For the 7th day in a row, FB’s daily low exceeded that of the day before, testimony to the increasing appeal the company’s fundamentals. As expected, some selling stalled its advance around its May 2012 IPO price of $38, buta move across $40 is likely this week..
. I DO NOT OWN, NOR HAVE I EVER OWNED APPLE OR FB.
A light week for reports on the economy is shaping up with today’s ISM Non-Manufacturing Index coming at 10 o’clock the highlight. The service industry accounts for close to 90% of our economy. The Fed’s Richard Fisher speaks today at 11:45, Charles Evans tomorrow at 9:30, Charles Plosser Wednesday at 12:30, and Sandra Pianalto at 1:40.
HOME BUYER BUYING PANIC ?
Mortgage rates rising, home prices rising, inventories decreasing !!
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com
ISM Non-Mfg. Ix, (10:00): Proj.: 53 for July vs. 52.2 in June and 53.7 in May.
International Trade (8:30) Proj.: $43.0 billion June
JOLTS (10:00) – Job Openings and Labor Turnover-Designed to be an improve over unemployment rate. BLS survey based on employment, job openings, quits, layoffs, discharges, etc. The number of “unfilled” jobs – used to calculate job openings rate is a measure of the unmet demand for labor. Proj.: 3.850 million job openings vs. 3.828 million in May
Consumer Credit (3:00p.m.): Proj.: $15 billion
Jobless Claims(8:30) Proj.: 338,000 week ended 8/3 vs. 326,000 the prior week. Numbers this time of year can be distorted by temporary summer layoffs in auto industry.
Wholesale Trade (10:00) Proj.: +0.4 pct.
“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.