Bulls Must Regain Control to Avert Correction

George Brooks |

BullOn May 17, I headlined, “Watch Rallies for Signs of Fatigue. On May 29, “Bulls, Not Bears, to Signal Start of Correction.” My point is, 2013’s surge in stock prices has been driven by relentless buying of stocks by institutions as they rise and especially on any dip, because money managers really don’t have anywhere else to invest. The market has climbed an unprecedented wall of worries since this bull market began in early March 2009. Until the Street started to worry in recent days about the Fed cutting back on asset purchases, there were no dominant worries to deter buying. The buying has been too persistent to enable a normal technical pause in the market’s rise over the last five months. A 4% to 8% CORRECTION WILL OCCUR, it is a question of when. The way I see it is that correction will be signaled more by a tail off in buying rather than by heavy selling. Watch the intensity of rallies for a clue. A sharp frenzied rebound indicates the intense buying is still there. A labored rebound indicates buyers have doubts about buying at these levels and are looking for better prices after a correction/consolidation. TODAY: Friday’s late-day plunge in prices damaged the “technical” picture and confirmed the essence of my Friday morning headline, “Bulls Must Step In – Now.” They didn’t Friday, this week they get another chance. Look for a rally failure, a bump to DJIA 15,192 (S&P 500: 1,638) followed by a further sell off , my “Initial” target 14,996 (S&P 500: 1,608). The market has risks to lower levels (DJIA 14,005 or so), but that depends on new news when it is declining. Today, the bulls really, really need to step in and regain control A move across DJIA 15,220 (S&P 500: 1,643) would be a start. Investor’s first read – an edge before the open DJIA: 15,115.51 S&P 500: 1,630.74 Nasdaq Comp.: 3,455.91 Russell 2000:984.14 Monday, June 3, 2013 (9:13 a.m.) NOTE: I am considering adding stocks to this blog, but haven’t decided on a format. Apple (AAPL: $449.77) Thursday’s breakout of a seven-day consolidation was only able to reach $457 before overall weakness in the market turned it back down. AAPL should find initial support at $441, though continued weakness in the market could take it lower, perhaps below $435. FACEBOOK (FB - $24.34) A technical bounce from May 29’s $23.26 low ran into resistance a shade below $25 Friday. The stock will need a stable market to recover significantly. The $19 - $22 area represents major technical. ECONOMY: We have a full docket of economic reports this week. For access to information including charts and graphics go to www.mam.econoday.com . MONDAY: PMI Mfg. Ix. (8:58): Projection: 52.1 ISM mfg. Ix (10:00) Projection: 51.0 Construction Spending (10:00) Projection: +1.0% TUESDAY Motor Vehicle Sales – Projection total U.S. Int’l: 15.2 mil rate International Trade (8:30) Projection -$41 billion WEDNESDAY:’ ADP Employment Rept. (8:15) Projection 171,000 new jobs Productivity and Costs (8:30) Factory Orders (10:00) Projection +1.4% ISM Non-Mfg. Ix. (10:00) Projection 53.8 Beige Book (2:00 p.m.) THURSDAY: Jobless Claims (8:30) Projection - 10,000 to 345,000 FRIDAY: Employment Situation (8:30) Projection Nonfarm 167,000 Private payroll 178,000 Unemployment rate 7.5% Consumer Credit (3:00 p.m.) +14 billion RECENT POSTS: 2013 May 13 DJIA 15,118 “Stocks Up – Bonds Heading Down” May 14 DJIA 15,091 “Correction: Pro & Con – What to Look For” May 15 DJIA 15,215 “Raise Some Cash – Politics to Get Uglier” May 16 DJIA 15,275 “Again, Raise Some Cash” May 17 DJIA 15,233 “Watch Rallies For Signs of Fatigue” Vacation: May 17 – May 27 May 28 DJIA 15,303 “Key Rally” May 29 DJIA 15,409 “Bulls, Not Bears, to Signal Start of Correction” May 30 DJIA 15302 “Key Juncture for Market’s Near-Term Direction” May 31 DJIA 15,324 “Bulls Must Step In – Now !” George Brooks “Investor’s first read – an edge before the open” sensiblesleuth@gmail.com …………………………………………….. 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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