Sequester looms, but who cares ? Clearly not the investment community. And maybe for good reason, Congress is adept at finding wiggle room for daunting issues, and maybe that is what the Street is counting on.
Technically, the market appears ready to explode on the upside. Intraday volatility suggests something is afoot.
The volatility reflects a wide difference of opinion about the intermediate-term direction of the market between buyers who have nowhere else to work their money and sellers who are locking in gains after a sharp move up in January.
Q4 earnings are mostly out with 74% of the 344 S&P 500 companies reporting earnings that “beat” projections. That would be more meaningful if analysts hadn’t learned to low-ball projections years ago.
I’m not a big fan of the grading system by brokers and heavy emphasis on quarterly results. Far too often, a company’s stock gets hammered even when it beats estimates. In fact, buying immediately prior to the report of quarterly earnings can be hazardous.
The economy is gaining traction, led by housing, which is what took it down in 2008. Yesterday, the National Assn of Realtors reported Q4 prices for single family homes rose 10% rose 10% over a year ago to $178,900
While odds slightly favor the bulls, this one will go one way or the other and the move will be sharp. Clearly, uncertainties associated with sequester and another debt ceiling debate are a negative, but the Street has known that for a month and stocks have risen.
Support is DJIA 13,860 (S&P 500: 1,500).
Investor’s first read – an edge before the open
S&P 500: 15,17.01
Nasdaq Comp.: 3,192.00
Russell 2000: 913.03
Tuesday, February 12, 2013 (9:03a.m.)
APPLE (AAPL: $479.93)
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.
TODAY: Yesterday, AAPL punched into the beginning of an area of serious resistance at $485. Without an announcement from management regarding the use of its stash of cash, I see AAPL sliding down now to the $467-$470 area, even $461 as it tests the January/February lows, $435-$442.
That would be an important test, which if successful would result in a major basing action between $450 and $510. Failure to hold above $444 would likely result in a drop a bit below $400. The test could take a week to develop. One more brief push across $490 is possible, but unlikely since it hit solid resistance yesterday.
I do not own, nor am I short Apple’s stock.
FACEBOOK (FB - $28.26)
Last week, FB’s technical pattern changed from positive to a weak neutral. The stock traded in a narrow sideways pattern throughout the week.
FB is getting hammered in pre-market trading, down below $28, a technical downside breakout of support at $28. The plunge was triggered by a downgrade by Sanford C. Bernstein who is a little late with its decision in light of the fact FB crossed $32 two weeks ago.
This weakness suggests FB will have to probe lower to find support, my estimate is $26.38.
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)
“Investor’s first read – an edge before the open”
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