BIG Money Licking Its Chops - Waiting

George Brooks  |

As expected, yesterday’s attempt to rally the stock market failed, probably owing to Fed chief Bernanke’s reference to the U.S. economy’s recovery as “frustratingly slow.” While Bernanke noted that the recovery warranted continued stimulus, he did not hint of a QE3.

Today: More selling, but a chance of a technical, short-term rally starting tomorrow after a drop to 11,930 on the Dow Jones Industrial Average (S&P 500: 1270).

Brooksie’s Daily Stock Market blog: An edge before the market opens.

Wednesday, June 8, 2011 9:23 am EDT

DJIA: 12,070.81
S&P 500: 1284.94
Nasdaq Comp: 2701.56
Russell 2000: 797.55

Since the May 2 peak, the stock market has wiped out the April Q2 earnings report celebration and is now probing for a level that discounts negatives and uncertainties.

How do I know the BIG money used the earnings report euphoria to sell (while everyone else was buying) ?

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They would never let the market drop this easily, otherwise. They are now sitting on the sidelines, licking their chops, waiting for hordes of investors to dump stocks out of fear and frustration. Then they will BUY !

Expect technical rallies, some good enough for the agile trader to exploit.

Expect some stocks to simply get oversold and represent long-term buys.

Expect an end to this ugliness, but not until the BIG money can look ahead and see an end to the softening tone in the economy and enough of an agreement on federal spending cuts to enable an increase in the nation’s debt level and avoid default on certain U.S. obligations.

I can’t believe an agreement won’t be reached, and I would think the BIG money sees it that way, as well.

So, it is pretty much a matter of how much more will the economy slip.

Since I am not an economist, I have to draw on common sense to conclude this is normal behavior for an economy that has been to the edge of a meltdown only two years ago.

The employment numbers will remain dismal until corporations must hire to meet an increased demand for production and services.

Meanwhile, fair or not, corporations will be making money and that is what investors care about, that is what attracts investment dollars.

George Brooks

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