So, the Fed is going to continue to do what it thinks grows the economy. Why does that surprise, or upset the Street?
What’s so bad about what Fed chief Bernanke said yesterday? If the economy’s condition warrants, the Fed will begin to back away from its current policy. If it doesn’t justify it, the Fed will continue its current policy. If it backs away, then finds it did so prematurely, it will begin buying bonds again.
I have been in this fray for 52 years, writing for 45, and I am beginning to wonder if the institutional base that drives stock prices has any solid basis for making decisions.
Mammoth institutions act like hopped-up line dancers on their only night out, jerking in one direction, then the other, taking the market up for no good reason, then down for none better. Really!!
The market did exactly what I expected it to do yesterday, it went down. But how could it not?
If the Fed does nothing new, I wrote, the Street will continue to worry that at some unknown point in time, the Fed will exit and the market will decline.
On the other hand, I reasoned, if the Fed infers it will begin an exit, however modest, the market will decline even more.
I then added that I felt that decline would provide an excellent buying opportunity.
That could happen today starting at 9:50 from the DJIA 14,985 (S&P 500: 1,613).
It all depends on the BIG money. This may be the signal they have been waiting for. If they step in, we will see new highs in July.
But they didn’t become BIG because they are careless. If they believe the market can decline further, they will wait.
That means a technical rally today, possibly to 15,064 from a drop to around 14,985, would fail and the market would decline in a jagged saw-toothed manner throughout most of the summer with a bunch of head-fake rallies tossed in torment investors.
. This is a defining moment for the BIG money.
How far down can the market drop if they don’t move in now ?
The potential is there for a drop to intraday DJIA 14,195 (S&P 500: 1,543).
DO NOT LOSE SIGHT THAT WE ARE IN A BULL MARKET WITH ROOM TO RUN, JUST NOT IN A STRAIGHT LINE.
The bull has climbed a huge wall of worries, but new worries will surface, probably from abroad. Even so, investing in U.S. equities is the only option for institutions. What they need is the ability to “time” those purchases. Those that have it will keep their clients, those who don’t will lose them.
Note:
Quadruple Witching Friday looms. While the expiration of stock-index futures, index options, stock options and stock futures hasn’t had a big impact on the stock market, it may this time.
Investor’s first read – an edge before the open
DJIA: 15,112.19
S&P 500: 1,628.83
Nasdaq Comp.:3,443.20
Russell 2000: 986.48
Thursday, June 20, 2013 (8: 45 a.m.)
Apple (AAPL: $423.00)
Yesterday, I noted AAPL needed a big buyer or it was going to $420 – $422 and possibly below $405. The latter is possible, but volume increased sharply yesterday when it dropped below $423 suggesting a buyer is using weakness to begin taking a position.
At 10 times earnings and yielding 2.82%, AAPL is a value, but management has not yet produced news that would prompt institutions to buy in-size. The Street is becoming impatient.
FACEBOOK (FB – $24.30)
FB is tracing out a base here with near-term support at $23.77 and overhead supply at$24.48.
ECONOMY:
We have an important schedule for economic reports this week. For access to information including charts and graphics go to www.mam.econoday.com . Great site !
THURSDAY:
Jobless Claims (8:30): +18,000 to 354,000
PMI Mfg. Ix. (8:58)
Existing Home Sales (10:00)
Philly Fed Svy. (10:00)
Leading Indicators (10:00)
FRIDAY:
Quadruple Witching Friday when contracts for stock-index futures, stock-index options, stock options, and single stock futures expire.
*FOMC:P Federal Open Market Committee: 12 voting members, 7 from the Fed. Res. Board, 5 from the 12 F.R. Banks.
Tasks: Oversee open market operations (buying and selling U.S. Treasury securities); make key decisions on interest rates and money supply. Establish a target level for federal funds rate (rate commercial banks charge between themselves for overnight loans between institutions that have surplus balances and those that don’t.
George Brooks
“Investor’s first read – an edge before the open”
[email protected]
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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.
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