We have a lot of money managers looking for any semblance of a green light so they can commit clients’ cash more aggressively.
Essentially, every one is looking at the same swing factors – the economy, corporate earnings, the Fed, European sovereign debt, Congress’s debt reduction/debt ceiling increase.
Brooksie’s Daily Stock Market blog: An edge before the open.
Thursday, June 23, 2011 9:23 am EDT
DJIA: 12,109.67
S&P 500: 1287.14
Nasdaq Comp: 2669.19
Russell 2000: 799.87
Without some changes in this gloomy picture, the market is obviously going to drop to a level where Wall Street feels the downside is limited and steps in with enough buying to reverse the market to the upside.
But, the kind of negatives depressing stock prices are the kind that can VANISH in a heartbeat.
It’s really a question of which will happen first – stocks find a level that discounts negatives, or we get an unexpected change in negative factors overhanging the market. This can happen within 5 weeks.
At first, I thought a bottom would occur close to the August 2 deadline for reaching an accord on a debt reduction plan and consequently a decision to raise the nation’s debt limit and avert a default on certain obligations. (My pick for a bottom – Friday July 29 or August 1).
I expected market pessimism would be mounting enough by then to depress the DJIA to the 10,700 – 10,830 area (S&P 500: 1150).
However, I am beginning to think Congress will be pressured to arrive at a decision before August 2, and avoid the destabilizing affects of bad publicity and unsettled markets here and abroad.
Of course, the economic outlook must be less dire, or at least the light at the end of the tunnel flickering for any rebound to have legs.
But, as fast as negatives piled up, that’s how fast the outlook can improve. Remember, the BIG money is always looking out ahead of the current picture. No guarantees, but this possibility must be acknowledged and prepared for. The market isn’t going to sit there waiting for everyone to jump on board.
George Brooks
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The writer of Brooksie’s Daily Stock Market blog, 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
