Over the weekend, Cypriot lawmakers were instructed by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) from bank depositors in return for financial aid. Decisions will be made today how to spread the adverse impact on depositors.
The Street’s doomsters welcomed the news to regurgitate all the paranoia that accompanied the fear mongering they spewed over the years as global economies struggled to recover from the Great Recession.
Could such a levy on bank deposits occur here, they ask?
Well, the doomsters were dead wrong about the U.S. economy, the euro, and the stock market over the last four years, denying scores of investors a chance to recoup monstrous bear market losses, so why listen now?
If we are to target any good that came out of the Great Recession and near meltdown, it is that it rocked the world’s economies and financial/fiscal infrastructure to the core, forcing realistic assessments of how things should be done and how not. While we came within a whisker of a total meltdown, we survived. At another point in time, maybe not.
That said, the recovery in both the economy and stock market is remarkable, historic. I can see the current bull market continuing, eventually yielding to a wild speculative phase.
BUT, there WILL BE corrections of 3% to 5% along the way, and one or more of those may be more like 8% to 12%), it all depends on whether or not bad news unexpectedly surfaces when a 5% correction is on the verge of reversing to the upside.
Support levels, or expected reversal levels, are reasonably predictable as long as the news environment does not change in the interim.
TODAY: The Europeans have successfully addressed bigger problems over the last three years than that posed by Cyprus. And new challenges await in the future, especially if economies abroad worsen. Expect a mixed open today. The DJIA will run into resistance starting at 14,512 (S&P 500: 1,557). I see resistance being more technical than Cyprus-related. The market is consolidating a 5.4%, 13-day upmove, and could slide lower in coming days, even to DJIA 14,290 (S&P 500: 1,537).
There are some nice short-term profits out there, but a ton of new money that needs a home.
Investor’s first read – an edge before the open
DJIA: 14,452.06
S&P 500: 1,552.10
Nasdaq Comp.: 3,237.59
Russell 2000: 947.20
Tuesday, March 19, 2013 (9:14 a. m.)
Apple (AAPL: $455.72)
Its 12-point gain yesterday improves AAPL’s technical pattern, indicating the possibility it has seen its low. The key now is, will other institutions rush in off the sidelines fearful its price will run away from them ? Resistance is now $467, Support is $442.
At less than 10 times earnings, (a 33% discount from the S&P 500’ P/E), customer service second to none, and down 35% from its September $705 high, this industry leader clearly should be attracting more buying. I sense there is some serious money earmarked for AAPL, it is just waiting for a greener light on earnings growth going forward. Currently, the Street appears to expect a big increase in AAPL’s dividend, possibly by as much as 50%. While that would increase its interest as an investment to a wider range of investors, just be aware that dividends are taxed and the price of a stock is reduced by the amount of the quarterly dividend on the ex-dividend day. If the stock is rising at the time, it will go unnoticed, but this is not free money.
I am not long or short AAPL.
FACEBOOK (FB – $26.49) After closing near its low for the day for 6 consecutive days, FB finally was able to rebound from $25.78 and recoup most of its loss for the day.) While its volume was unimpressive, its price action suggests interest is developing a little below $26 a share.
I am not long or short Facebook.
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.
TUESDAY
FOMC meeting begins
Housing Starts (8:30)
WEDNESDAY
FOMC meeting announcement (2:00)
Bernanke press conference (2:30)
THURSDAY
Jobless claims (8:30)
FHFA House Price Ix. (9:00)
Existing Home Sales (10:00)
Philly Fed. Svy.(10:00)
Leading Indicators (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.
