Money managers are seeing stocks run away from them, increasing their urgency to pick up stocks before the prices exceed their buy limits. It’s what I call a “push pattern,” and it could turn into a buying panic, which can get sloppy.
Quick money can be made under these conditions, but not without risk. The intensity of the surge in prices is driven by fear of missing opportunities, as well as better than expected news like the ADP Employment report at 8:15 this morning which showed more new hires for February than expected. February’s count came in at 198,000 vs. a projected 170,000.
The news headlines are also featuring “new all-time highs” for the market averages, and from here on in will do likewise for every high posted, however slight.
It’s the reverse of the market approaching a bear market bottom which we did four years ago this month when new lows were trumpeted every day and investors got more bearish with every decline. At some point, it ends, as will this advance.
But, we are only crossing the threshold of speculation, the “fever” can run a lot higher before a bear market sets in, unless triggered by an extraordinarily bad event.
We have yet to see speculation in low-priced stocks.
What has yet to power the upside in a huge way is money flowing out of safe havens into stocks. That money was socked away in safe keeping (earning nothing) in face of real danger from a host of negatives.
Seeing other people make money, is a wrenching experience, so that money will flow into stocks.
Yes, the individual investor will buy-in near the top, but there are institutions that have had to retain a lot of cash “just in cast.”
Sometimes, the less you know under these conditions, the more money you can make, up to a point where “they” take it all away from you. A point is reached where investors buy overpriced stocks, expecting to sell them to a greater fool at a higher price (greater fool theory).
Not there yet.
Investor’s first read – an edge before the open
DJIA: 14,253.77
S&P 500: 1,539.79
Nasdaq Comp.: 3,224.13
Russell 2000: 927.40
Wednesday, March 6, 2013 (9.07a.m.)
APPLE (AAPL: $431.14) AAPL rebounded sharply in early trading yesterday but ran into resistance at $435. The stock desperately needed buying after its technical breakdown Friday and Monday. Support is $425. We are seeing some buying interest between $425 and $430. Stock needs a break above $435 on BIG volume.
FACEBOOK (FB – $27.52) Monday was a consolidation day with trading between $27.44 and $28.06. Tuesday followed suit with trading ranging between $27.21 and $38.18. FB’s technical pattern is now neutral, improved from negative, but needs some aggressive buying to top resistance which showed up a little above $28 when it jumped out at the open yesterday. Odds favor a break above $28 today and attack ont the $30 level.
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.
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.
WEDNESDAY:
ADP Employment Rept. 8:15)
Factory Orders (10:00)
Beige Book (2:00)
THURSDAY:
International Trade (8:30)
Jobless Claims (8:30)
Productivity and Costs (8:30)
FRIDAY:
Employment Situation (8:30)
Wholesale Trade (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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