Brooksie’s Daily Stock Market blog – an edge before the open
Friday, October 21, 2011 8:50 am EDT
DJIA: 11,541.78 S&P 500: 1215.39
As we get rudely buffeted by conflicting forecasts out of Europe, strung out by meetings, meetings, meetings, and by the doomsters preaching a double dip, or worse, and financial contagion, let’s step back and realize the European and U.S. must get it right this time around.
Whatever time it takes, whatever sacrifices must be made, let’s get it right. Do that and a great and sustainable bull market will unfold.
Let’s not lose sight of the fact economic and “job” recoveries are a product of the recession that preceded them.
Last July, the Economist online published an article “Recessions Compared” where it graphically tracked four recession/recovery periods (1973-1975, 1981-1982, 1990-1991 and 2007-2009).
It is obvious the 2007 – 2009 recession was far more severe than its predecessors. Consequently, a recovery in jobs CANNOT be expected to occur quickly. The fact jobs are slow to pick up is not a guarantee we will slip into a recession.
We are 32 months into a bull market and 28 months into an economic recovery. Both encountered a significant slowdown starting in May. So far, our economy has stabilized enough to comprise a base for a renewal of the economic recovery begun in mid-2009.
A continuation of the bull market and economic recovery hinges on European leader’s ability to consolidate the capabilities of 17 nations into a concrete plan that ensures the liquidity of its banking system and solvency of its weaker governments.
Americans must grab their congressional leaders by the lapels, pin them up against the wall and in no uncertain terms demand that they set partisan politics and agendas aside, get a fair and effective job done to reinstate fiscal stability and economic growth, or it is they who will get kicked down the road, not a can…. or where appropriate, tossed overboard, not the tea.
TODAY: The U.S. stock-index futures are up sharply before the open indicating a strong open. That can change minutes before the open, it only takes a thoughtless comment by someone with visibility.
Looks like traders and institutions are front-running a weekend decision arising from the summit meeting of finance ministers, et al in Brussels Sunday. Assuming, good news is announced Sunday, another surge in the stock market should follow on Monday. There is another meeting scheduled for Wednesday.
Assuming the Europeans produce a concrete plan for addressing its problems, the DJIA could surge to 11,950 (S&P 500: 1255).
By their many waffles, detours, dead end streets and delays, European leaders have conditioned investment communities here and abroad to be wary of expectations.
As always, investors must contain their emotions, being careful NOT to pay up for stocks that have had a huge, one-day run. This happens most on “market” orders at an open.
FAILURE to reach an agreement ? Look for DJIA 11020 (S&P 500: 1150)
The SuperCommittee has been lost in the shuffle, upstaged by international financial worries and the state of our economy here at home. Nevertheless, it will raise its ugly head to remind us whether our government is, or is not, dysfunctional.
12-member SuperCommittee timeline:*
Oct. 1- Dec. 31: Both houses of Congress must vote on a Balanced Budget Amendment.
Oct.: 14: Deadline for House and Senate Standing Committees to submit recommendations.
Nov. 23: Deadline for both houses to vote on a plan with a 10-year deficit reduction goal of $1.5 trillion Dec. 2: Deadline for committee to submit report and legislative language to President Obama andCongress.
Dec. 23: Deadline for both houses to vote on committee bill.
Jan. 15, 2012: Date that the “trigger” leading to $1.2 trillion of future spending cuts goes into effect if
the committee’s legislation has not been enacted.
Feb. 2012: Approximate time when first $900 bn of debt ceiling runs out.
Feb./Mar.2012: Deadline for Congress to consider a resolution of disapproval for the second tranche
($1.2 – $1.5 trillion) of debt limit increase.
Fall/Winter 2012: When additional $2.1 – $2.4 trillion of borrowing authority from this law runs out.
Jan.2, 2013: OMB orders sequestrations for defense and non-defense categories of spending necessary
to meet spending cuts required by the “trigger.”
Recent blog headlines:
Oct. 3, DJIA: 10,913, “Almost Ugly Enough for a Buying Juncture”
Oct. 4, DJIA: 10,654, “ Marching to Europe’s Drumbeat – October Opportunity Looming”
Oct. 5, DJIA: 10,808, “ News Whipsaw Becoming Problem for Bottom Watchers”
Oct. 6, DJIA: 10,939, “Rally Entering Area of Resistance. Euro-Rally a Fake out”
Oct. 7, DJIA 10,939 , “Traders’ Sell – Investors – Defer Purchase”
Oct. 10, DJIA: 11,103, “Euro-Fog Lifting – Street Looks to Q3 Earnings”
Oct. 11, DJIA: 11,433, “Easy Does It – Market Needs BIG Buying to Advance From Here”
Oct. 12, DJIA: 11,416, “Looking Beyond This Mess”
Oct. 13, DJIA: 11,518, “180-Degree Change in Expectations – No Room for Surprises”
Oct. 14, DJIA: 11,478, “Europe Still the Key – Q3 Earnings Run a Close Second”
Oct. 17, DJIA: 11,644, “Snags En Route to Euro-Solution to be Expected”
Oct. 18, DJIA: 11,392, “Test of the October 4 Rally’s Strength”
Oct. 19, DJIA: 11,577, “Best Six Months Looms, But Volatility to Continue”
Oct. 20, DJIA: 11,504 “All Eyes on Euro-Summit this Weekend”
George Brooks
*National Journal
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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.
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