The sequester is still an odds-on likelihood, but only the Defense Dept. seems worried. The Street doesn’t care. Neither the White House of Congress is panicking.
So far, the behavior of the stock market suggests, sequestration is already priced into the market, or Washington will come up with another delaying tactic to minimize the impact of automatic spending cuts.
It’s hard to build a case for buying or selling. Investors must decide for themselves whether buying before a sharp decline is worth the risk versus not buying and seeing stock prices go higher.
The technical picture is eerily positive, reflecting a steady, but not aggressive, flow of funds into stocks.
It looks like we are at that juncture where doubt about the economic expansion continuing is yielding to a focus on whether it will accelerate, sequester or not. The great bear market of 2007 – 2009, started at the current level, but the problems that were about to unwind are now history, so the current level of the stock market (ex the problems) is justified, as would higher prices be with some help from the economy.
TODAY:
Nothing happened last night to impact the stock market before the open which should be a smidge higher.
Support is DJIA 13,990 (S&P 500: 1,516).
Investor’s first read – an edge before the open
DJIA: 14,018,74
S&P 500: 1,519.43
Nasdaq Comp.: 3,186.49
Russell 2000: 917.52
Wednesday, February 13, 2013 (9:03a.m.)
APPLE (AAPL: $467.90)
Monday, AAPL rose into resistance area at $485 and hit a wall. Tuesday, I warned that it would slide to $467 – $470, possibly drop further to $461 as it tests the January/February lows of $435 – $442.
I noted a drop like 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, I added, would likely result in a drop a bit below $400.
AAPL closed at $467 yesterday.
Resistance is now $473. A further slide to $461 is possible today, but traders may be positioned above that ($464 – $465). I have seen this “slippage” pattern in AAPL before and a 2-3-point spike down after an orderly slide has been followed by a rebound.
I do not own, nor am I short Apple’s stock.
FACEBOOK (FB – $27.37)
Yesterday’s decline was triggered by a downgrade by Sanford C. Bernstein.
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.
ECONOMY:
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.
WEDNESDAY:
Retail Sales (8:30)
Import/Export Prices (8:30)
Business Inventories (10:00)
THURSDAY:
Jobless Claims (8:30)
FRIDAY:
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”
[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.
