The bulls are in control, but appear a little edgy. Once again, both DJIA and S&P 500 ran into a wall at my resistance levels at DJIA 14,512, S&P 500: 1,557). Both days traded a bit higher, intraday. This same general area turned the market down last Friday.
If the Bulls got anything left in the tank, they will blow the market out here, taking the DJIA across 14,600 (S&P 500: 1,570).
If they are riding on the fumes, we will get a correction, possibly that 3% to 5% correction.
So, what’s the big deal ?
Well, if you buy right before a correction like that, it may take months to get even. Then too, what if a new negative hits the market after it has corrected and is ready to rebound. Now a 3% to 5% correction becomes a 5% to 12% correction – “ouch.”
If you haven’t noticed, I prefer to be wrong with my money in my pocket rather than stocks. Readers must assess their own tolerance for risk. That way, an investor is in shape to take advantage of new opportunities. If caught by a plunge in prices, the investor must first recoup losses before making money.
However, this philosophy didn’t pay when I expected continued Congressional partisan brawling over the fiscal cliff and sequester. No punches were thrown, just barbs. The market went up. While I capitulated as soon as I realized I was wrong, I missed a part of a nice rally. #@8*&’{#@
Had I had it to do over again (without benefit of hindsight), I would have concluded the same thing. Base decisions on logic, except for extremes when contrary thinking is necessary, always when your emotions are contrary.
Another point. This is one business you cannot afford the luxury of delusion, they keep score every day.
Minor support is DJIA 14,410 ( S&P 500: 1,544). Breaking that, look for DJIA: 14,290 S&P 500: 1,535.
Investor’s first read – an edge before the open
DJIA: 14,511.71
S&P 500:1,558.71
Nasdaq Comp.: 3,254.18
Russell 2000: 951.95
Thursday, March 21, 2013 (9:14 a. m.)
Cyprus: The European Central Bank (ECB) served Cyprus with an ultimatum – it will cut off emergency funding beyond Monday, March 25, if its government fails to agree on the bailout terms required by the European Union (EU) and International Monetary Fund (IMF). In the interim, Emergency Liquidity Assistance (ELA) is provided by the Governing Council of the ECB.
Earlier this week, Cyprus’ parliament rejected a proposed levy on bank deposits that was designed to raise 5.8 Billion euros ($7.5 billion), required for Cyprus’ bailout. The solvency of Cypriot banks is in question without the recapitalization provided by the financial aid.
CONCLUSION: The seriousness of this crisis may escalate going into the weekend, but Europe solved bigger problems in the past. Earlier this week, sensationalists queried, could a levy on bank deposits occur in other countries, including the United States ? The idea caused a brief ripple !
Apple (AAPL: $452.08)
AAPL is still in a rebound mode with resistance unchanged from yesterday at $467 and support at $442. Yesterday’s market action was disappointing considering the overall market was upbeat. Volume was light. When institutions decide to step in on this one, it won’t have a slow day and sit there trading sideways within a narrow range, waiting for every interested investor to jump on board. There appears to be minor support at $449. Breaking that would lead to a drop to $442. Bulls need a move across $460.
At less than 10 times earnings, (a 33% discount from the S&P 500’ P/E), customer service second to none, and down 35% from its September $705 high, this industry leader clearly should be attracting more buying. I sense there is some serious money earmarked for AAPL, it is just waiting for a greener light on earnings growth going forward. Currently, the Street appears to expect a big increase in AAPL’s dividend, possibly by as much as 50%. While that would increase its interest as an investment to a wider range of investors, just be aware that dividends are taxed and the price of a stock is reduced by the amount of the quarterly dividend on the ex-dividend day. If the stock is rising at the time, it will go unnoticed, but this is not free money.
I am not long or short AAPL.
FACEBOOK (FB – $25.86) While Tuesday’s rebound from a four-day sell off was impressive, Wednesday’s was not, suggesting FB has to probe lower to find a comfort level. There is a seller here using any buying to unload stock. I expect buyers to start nibbling a bit above $25, but big buying is needed here to reverse a slide that began Feb. 1. Resistance continues to creep down and is now $26.45.
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.
ECONOMY:
This will be a heavy 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.
THURSDAY
Jobless claims (8:30)
FHFA House Price Ix. (9:00)
Existing Home Sales (10:00)
Philly Fed. Svy.(10:00)
Leading Indicators (10:00)
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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