I think there is a significance to the increased intraday volatility we saw last week with exaggerated swings both ways in the market averages, only detectable on charts that show trading at short intervals within each day.
It reflects a wide difference of opinion about the intermediate-term direction of the market, but I don’t think the market has tipped its hand yet.
The biggest negative is the uncertainty about what will happen with the sequester, which deadlines March 1. The Obama administration is pushing for a delay in the $85 billion of automatic spending cuts resulting from the sequester kicking in, arguing that such drastic spending cuts would cause widespread disruption throughout the country; The U.S. House opposes a delay pursuant to developing an alternative plan, but one that does not involve any tax increases.
Congress is expected to take a break during the week following President’s Day, Monday the 18th , returning the 25th, leaving four days to deal with the sequester.
On March 27 the government runs out of funding again, requiring a vote to increase the debt ceiling, on April 15, Congress must vote on the budget outlines for FY starting October 1. On May 19, the government’s authority to borrow money expires.
That’s a steep “wall of worry” to climb for a market that has already risen 6.4% this year.
The market averages look like they are ready for a breakout on the upside. That may be so, I think buying such a breakout would be risky.
This bull market has a lot of room to run, but not in a straight line – careful !
Investor’s first read – an edge before the open
S&P 500: 1,517.93
Nasdaq Comp.: 3,193.87
Russell 2000: 913.67
Monday, February 11, 2013 (8:50a.m.)
APPLE (AAPL: $474.98)
Last Thursday, David Einhorn, Greenlight Capital, urged APPL’s management to “return more cash to shareholders.” APPL’s response late in the day that it will “thoroughly evaluate” Einhorn’s proposal triggered heavy buying before the close with a follow through on Friday.
The news was a wake up call to investors that AAPL’s stock has more value than the Street is giving it credit for, assuming AAPL’s management employs its $137 billion of cash ($145 a share) in a way that benefits stockholders.
It’s an asset that can be deployed and that is welcome for a company whose stock has been pummeled relentlessly, down 33% since its high in mid-September.
Support rises to $468, resistance rises to $481..
I do not own, nor am I short Apple’s stock.
FACEBOOK (FB – $28.54)
Last week, FB’s technical pattern changed from positive to a weak neutral. The stock traded in a narrow sideways pattern throughout the week. There are sellers at $29.25, though I would put near-term resistance at $28.88. FB needs a big buyer to work through the sellers, and push it up across $29.30 to turn it positive. Support is $28.20
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 target a bottom as with FB. Comments are based on technical analysis only.
This will be another light week for economic reports.
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.
NFIB Small Business Optimism Ix. (7:30)
Retail Sales (8:30)
Import/Export Prices (8:30)
Business Inventories (10:00)
Jobless Claims (8:30)
Empire State Mfg. Svy (8:30)
Industrial Production (9:15)
Consumer Sentiment (9:55)
*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.