Clarity Needed: Future of Entitlements and Fiscal Cliff Needs to be Addressed

George Brooks |

Technically, the market looks like it wants to rally today. Five attempts to sell off during the last four days have failed to gain momentum, each of the five finding buyers at slightly higher levels.

While advancing issues and declining issues were even yesterday, the up-volume/down-volume ratio was positive. The DJIA lagged the S&P 500 and the Nasdaq Comp. yesterday primarily as a result of declines in Chevron (CVX) and Hewlett Packard (HPQ), which declined a total of 4 points, costing the DJIA 31.53 points. One-third of the DJIA’s 30 stocks declined.

This stop-and-go action is typical of markets faced with uncertainties that don’t have short-term solutions, namely recession possibilities in major economic powers and the looming fiscal cliff here. The outcome of the elections is an uncertainty, but we will have an answer early next month.

Investor’s first read - an edge before the market opens
DJIA: 13,494.61
S&P 500: 1450.99
Nasdaq Comp.: 3135.22
Russell 2000: 828.78
(Thursday, October 4, 2012 (9:09 a.m.)

TODAY: The DJIA 13,600 (S&P 500: 1457) level is what the bulls need to top decisively to turn this uncertain consolidation positive.

DJIA 13,438 (S&P 500: 1438) are still minor support. A break below those levels would lead to a test of more important support at DJIA 13,360 S&P 500: 1430), which is definitely a level bulls don’t want to see broken, since it suggests a drop to DJIA: 13,210 (S&P 500:1420).

ECONOMY:

The ISM Non-Manufacturing Index jumped sharply in September suggesting there is some life in this economic recovery after all. September’s Index rose to 55.1 from 53.7.. Both the business activity/production index and new orders index rose sharply, however the employment index dropped. The Index is a product of a survey of 375 firms encompassing a broad spectrum of the economy, including mining, construction, transportation, communications, wholesale and retail trade. It is comprised mostly of the service sector, which makes up the bulk of the nation’s economic activity.

The ADP Employment report for September showed job gains of 162,000, a bit above forecasts for 140,000 jobs,
Jobless Claims for the week ended September 29 were up 4,000 to 367,000, the 4-week average was unchanged at 375,000.

Factory Orders will be reported at 10 o’clock. Projections call for a drop of 5.9% in August after an increase of 2.8% in July.
Tomorrow, we get the Employment Situation report, which is more revealing than today’s Jobless Claims insofar as the economic recovery is concerned.
EUROPE:
The European Central Bank (ECB) and Bank of England hold policy meetings today. Clouding the picture is the question of a Spanish bailout. Will it or won’t it ask for a bailout?

CONCLUSION:

Technically, the market looks like it wants to rally today. Five attempts to sell off during the last four days have failed to gain momentum, each of the five finding buyers at slightly higher levels.

While advancing issues and declining issues were even yesterday, the up-volume/down-volume ratio was positive. The DJIA lagged the S&P 500 and the Nasdaq Comp. yesterday primarily as a result of declines in Chevron (CVX) and Hewlett Packard (HPQ), which declined a total of 4 points, costing the DJIA 31.53 points. One-third of the DJIA’s 30 stocks declined.

This stop-and-go action is typical of markets faced with uncertainties that don’t have short-term solutions, namely recession possibilities in major economic powers and the looming fiscal cliff here. The outcome of the elections is an uncertainty, but we will have an answer early next month.

TODAY: The DJIA 13,600 (S&P 500: 1457) level is what the bulls need to top decisively to turn this uncertain consolidation positive.

DJIA 13,438 (S&P 500: 1438) are still minor support. A break below those levels would lead to a test of more important support at DJIA 13,360 S&P 500: 1430), which is definitely a level bulls don’t want to see broken, since it suggests a drop to DJIA: 13,210 (S&P 500:1420).

FACEBOOK (FB - $21.83):

FB looks like it has traced out a double bottom and possibly a “Head and Shoulders” reverse pattern with the potential of returning to the mid-20s. FB must hold above support at$21.70. A break above $22.50 paves the way for a move to $23 - $24.

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 I felt at $34 it was very vulnerable in face of all the misunderstanding and hype.

George Brooks

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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.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
HFFC HF Financial Corp. n/a n/a n/a 0

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