Bulls: Room to Run, But Not in a Straight Line

George Brooks |

Last week the DJIA topped its October 11, 2007 all-time, intraday bull market high; the broader based S&P 500 will soon follow suit.
Will the market continue to run ?
barring a major unforeseen political, economic or international development. As I noted last week, the stock market is now back to the level where the great bear market of 2007 to 2009 started, a market that trashed the S&P 500 to the tune of 58% in two years.
However, we are not looking at the host of negatives today that we faced 2007, the collapse in home prices, the stock market and economy here and abroad.
We went to the brink of a total meltdown back then, and survived.
To me, that suggests the stock market is more realistically valued today than it was in 2007, and in fact, has room to run. Odds favor a surge in speculative fever and especially in small company stocks before this bull market is over.
As the press reports new bull market highs for each new high posted, investors will become increasingly bullish. Speculative fever will mount. First-time investors will rush to own stocks. The less you know, the more money you will be able to make, until the markets reach a bull market peak. Stock prices will begin to fall. Investors will see the drop as an opportunity to buy and will buy even more aggressively. Much like a Venus Flytrap snares its prey, a bear market will devour individual investors once again.
We are not there yet, but corrections can, and will, come out of nowhere, so be careful.
Small corrections can become bigger, if new negatives hit the market as it is just beginning to rebound.
The big casualty in all this will be long-term bonds as interest eventually run up. Yes, I have warned about this before, and I think that market has already peaked, but it is not too late to reduce exposure to these bonds whose value will drop as interest rates rise.
Investor’s first read – an edge before the open
DJIA: 14,397.07
S&P 500: 1,551.18
Nasdaq Comp.: 3,244.37
Russell 2000: 942.50
Monday, March 11, 2013 (9.12 a.m.)
4 Years Ago - Headlines from Investor’s first read blogs
“Does the Cauldron of Fear Have to Boil Before This Market Turns” DJIA: 7,114 Feb 24, 2009
“When the Fear of Owning Stocks Turns to the Fear of Not Owning Stocks” DJIA: 7,350
Feb 25, 2009
“Big Money in the On-Deck Circle” DJIA: 7,270 , Feb 26, 2009
“Lock and Load” DJIA: 7,183, Feb 27, 2009
“9 Trillion Cash on Sidelines vs. $8 Trillion NYSE Market Value” DJIA: 7,062, Mar 2, 2009
“Ready….. Aim….” DJIA: 6,832 Mar. 2, 2009 SPECIAL BULLETIN (12:55P.M.)
“Big Money Reaching for the Bushell Basket” DJIA: 6,818, Mar. 3, 2009
“Once Off Sidelines, Big Money Good for a 1,500 – 2,000-point Rally” DJIA: 6,726 Mar 4, 2009
“Climactic Buy Possible by Tuesday” DJIA 6,875 Mar. 5, 2009
“Just Be Ready for a Big Buying Opportunity” DJIA: 6,626, Mar. 9, 2009
“Will Big Money Wait for the Numbers to Improve to Buy ?” DJIA 6,547, Mar. 10, 2009
“FIRE ! (BUY)” DJIA: 6,805 Mar. 10, 2009 SPECIAL BULLETIN (10:25 a.m.)
(Bear Market Ended March 9, 2009 down 55% (intraday) from the October 11, 2007 high).

The U.S. House passed a continuing resolution to keep the government funded through the end of its fiscal year (September 30). The U.S. Senate will present a different version this week, it is expected the two chambers will reach an accord before March 27.
APPLE (AAPL: $431.72) There are buyers between $425 and $435, but there has been a steady seller here since mid-February, as well. Buyers did not have enough momentum in early trading to break AAPL up through $435 Friday, sellers pounced on it and the rally faltered. A break above $442 improves the pattern, but it will take more to turn this stock bullish. I think a 39% beating is enough to discount a lot of adversities. What the Street needs is fewer gun slingers and more investors with a longer term perspective. At $700, it was overpriced, but for a leader in its industry with a s-load of cash, this is overdone. At some point, value will be recognized. Can AAPL still sink below $400 ? Yes, but it is less likely now that money managers are scrambling to find stocks to buy. Clearly those who sold above $600, have got to be thinking of buying back in at these levels. Investors coming off the sidelines looking for ideas have got to find AAPL attractive. Granted, its growth rate is much less than in recent years, but this is still a powerhouse in its industry.
I am not long or short AAPL.
FACEBOOK (FB - $27.96) FB needed aggressive buying to sustain a move across $28 and got it with a gain of $1.13 on above average volume last Thursday, but the buyer was gone Friday and light volume let the sellers back in charge as it easily broke down below support at $28.12. There is a lot of intraday volatility here with the bears barely hanging on to the lead.
I don’t own, nor have I ever owned FB.
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.
NFIB Small Business Optimism Ix. (7:30)
Treasury Budget (2:00)
Retail Sales (8:30)
Import/Export Prices (8:30)
Business Inventories (10:00)
Jobless Claims (8:30)
Producer Price Ix.(8:30)
Current Account (8:30)
Consumer Price Ix. (8:30)
Empire State Mfg. Svy.(8:30)
Industrial Production (9:15)
Consumer Sentiment (9:55)
George Brooks
“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.

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