The bulls “brought it” yesterday. While they couldn’t recoup Monday’s loss, they took the bear’s best punch and closed on an upbeat note.
Again, the pattern of persistent buying was evident, but the bulls are going to be tested again today, and better be able to reverse this morning’s opening plunge with a rebound on par with yesterday’s bounce.
A good part of the persistent buying recently has been the “cruise control” type, automatic pilot stuff where buy orders are systematically submitted without giving thought to any change in current events. If a computer isn’t programmed to think outside the box, it won ‘t.
It is classic for these buyers to view any correction as a wonderful opportunity to buy at the first sign of lower prices, and that is what they do.
This is what used to be referred to as the “odd lot” (small investor) response. They have a rep for buying at the top. Actually, it is a bit after the top when the market is beginning to plunge when they do their heaviest buying. They think they are being gifted with lower prices when in fact they are being led to gallows.
That could be the case here. I don’t think it is, but my mind is open to a nasty correction. One will come and probably when least expected.
This is why the bulls must step up to the plate again today. Yesterday’s rebound wasn’t proof enough. I expect the DJIA to drop below DJIA 14,690 (S&P 500: 1,567), followed by a rally, most likely this afternoon. A rally failure would indicate enough weakness to enable the DJIA to drop to 14,615 (S&P 500: 1,557) tomorrow.
A strong rebound today with the market averages recouping this morning’s loss and posting a gain would indicate a continuation of the uptrend started early this year.
NOTE: I find there is often a mid-afternoon counter-move to the prevailing trend during the day. It generally comes between 2:30 and 3:15 and can be a head-fake for investors thinking this change in direction is going to continue. Nothing carved in granite here. Just be aware this phenom occurs.
Investor’s first read – an edge before the open
S&P 500: 1,574.57
Nasdaq Comp.: 3,264.12
Wednesday, April 17, 2013 (9:07a. m.)
SEQUESTER: May become a factor.
At some point, the question will be raised about the sequester’s impact on the economy, notwithstanding the uncertainty it brings to persons at risk, directly and indirectly.
It is too early to expect anything to show up in the indicators, and it may never be a major issue if our economic recovery gains traction.
It is one of those potential negatives one has to consider along with other ingredients that lead to a decision to buy or sell.
Employers (government or private) may opt to furlough employees without pay, cut back on hours rather than release them to unemployment at the expense of the government. Even so, several weeks without pay has an impact on the economy.
This is one of those uncertainties that, along with a few others, can trigger a consolidation or pullback in the stock market.
Apple (AAPL: $426.24)
AAPL dropped to $419 Monday, a critical support level, in that it reversed nasty plunges in early March and early April. If $419 holds it would be a “triple bottom.” That is a big “if” in that triple bottoms do not have a great record for holding.
To its credit, AAPL was able to muster enough support at $419 yesterday to prevent a new 2013 low and a likely plunge below $400. If the overall market was down big again yesterday, it is likely AAPL would not have held above $419. Now, right NOW, AAPL needs a deep-pocket, aggressive buyer.
My read here is “technical” only, the “fundamentals” seem to defy the Street’s best and brightest, so I’m not going there. I can see a move up to $428.60 where it will meet resistance.
Q2 earnings will be announced on Tuesday, April 23.
I am not long or short AAPL.
FACEBOOK (FB – $26.92)
FB got stopped cold at resistance at $28 Friday, and didn’t have a chance to rebound Monday, but did so yesterday. Currently, its technical pattern is neutral. Resistance starts at $27.88, support is $26.40.
Between Aug. and Dec. last year, a trading range between$18 and $24 developed. That should provide support for FB and a buying opportunity. That’s where a three month tug of war took place between the believers and non-believers.
I am not long or short Facebook.
This will be a 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.
Jobless Claims (8:30):
Bloomberg Consumer Comfort Ix>(9:45):
Philadelphia Fed. Svy(10:00)
Leading Indicators (10:00):
“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.