Investor’s first read - Brooksie’s edge before the open
Friday, August 10, 2012 9:07 a.m.
S&P 500: 1408.80
Nasdaq Comp.: 3018.64
Russell 2000: 802.90
Today starts a correction that comes after an upmove stalls due to a fall off in volume. Yesterday I targeted two levels where a correction can find support.
DJIA 13,050 (S&P 500: 1388). Breaking that look for DJIA12,970 (S&P 500: 1380).
We have had four corrections since mid-June, the most recent (July 7/30 – 8/2) which was less pronounced than the preceding three.
Strength in recent weeks was mostly due to reassurance by the Fed that it was there if needed and by European leaders that the euro’s survival would have their best efforts (?).
A number of uncertainties loom – the November election, Sequestration and increasing evidence of a global economic slowdown.
All will continue to be an uncertainty. I can’t imagine Congress will allow an automatic slash in spending ( Sequestration), too much damage to voters and interest groups. As an uncertainty, it can persist until after the elections, just be alert to the possibility Congress will attempt tone it down before the election.
We won’t know how far Europe and Asia can slide, or how great an impact that will have on our economy.
Logically, our economy is struggling, so the same for global economies won’t help.
CONCLUSION: The stock market can adjust for negatives, i.e. find a comfort level and stabilize. It has always had a problem with uncertainties, ergo it ranges widely in price erratically.
A correction here would give us a read on what the BIG money thinks of all this. We aren’t going anywhere without them. Aggressive buying on a correction would be very bullish. Their absence would enable a correction that stands to “pinch.”
Facebook ($21.01 ) Again - no change here. Tuesday’s plunge qualifies as the beginning off a test of last week’s $19.82 low. As such it is shaping up as a potential “double bottom” (tech term), but IMHO the bottoms are too close in time, ergo the risk of new lows.
My worst case low for FB is $16.88, however that would have to occur on very heavy volume – 200 million – 260 million shares
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.
Consumer Credit (3:00p.m.):Rose sharply $17.1 bn in May with student loans a big contributor to to non-revolving loans.
Productivity and Costs (8:30a.m.): Business productivity declined 0.9% in Q1, revised upward from a gain of 0.5% vs. a gain of 1.2% in Q4, 2011.
Jobless Claims (8:30): Declined 6,000 to 361,000 in the week ended August 4, beating forecasts of 370,000 and a rise in claims of 367,000.
U.S. International Trade Gap (8:30a.m.): Narrowed 11% to $42.9 billion as imports declined and exports rose.
Wholesale Inventories (10:00a.m.): Bad news from the Wholesale Trade numbers. Sales nosedived in June bumping the Inventory/Sales ratio up to 1.20 from 1.80.
Import/Export Prices (8:30a.m.): Import prices dropped sharply in June by 2.7% following a downwardly revised decline of 1.2% in May. Export prices declined 1.7% in the period.
July 12 DJIA 12,609 “June 4 Rebound “Must” Hold or Else !”
July 25 DJIA 12,617 “June 4 Lows at Risk”
July 26 DJIA 12,676 “Don’t Buy the Open”
July 27 DJIA 12,887 “Facebook Selling Climax Monday ?”
July 30 DJIA 13,075 “Market Betting the Fed Will Act”
July 31 DJIA 13,073 “Face-off: Negatives and Uncertainties vs. Positives”
Aug. 1 DJIA 13,008 “Fed Action Hoped For”
Aug 2 DJIA 12,976 “Recovery Sucking Wind, Not Tanking”
Aug 3 DJIA 12,976 “What This Market Needs”
Aug 6 DJIA 13,092 “NEXT ! Sequestration”
Aug 7 DJIA 13,117 “Is The Light Green Enough ?”
Aug 8 DJIA 13,168 “Facebook Testing Lows”
Aug 9 DJIA 13,175 “Alert: Congress Seeking Wiggle Room”
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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