Friday, November 4, 2011 9:09 am EDT
DJIA: 11,836.04 S&P 500: 1218.28
TODAY: A rally today stands to run into selling prior to the weekend and a news environment that is uncertain at best. I see the possibility of a drop to the DJIA 11,720 (S&P 500: 1225) area.
October’s Employment Situation report this morning was generally positive in line with a stabilizing, but slow growth economic recovery. An estimated 80,000 workers were added to the workforce vs. an upward revision of 158,000 in September. The private sector actually added 104,000 workers, but government layoffs reduced the total. The unemployment rate dropped to 9.0% from 9.1%.
Presently, it appears that the referendum on the Greek bailout plan is off the table, but no guarantees yet. Ratification of the European bailout is likely, but who knows in this environment. Depending on a confidence vote in parliament today, Greece’s Prime Minister George Papandreou may have to step down and a “unity” government of sorts to take over in the interim
The Street wants more progress on the economic recovery. Realistically, the Street should be satisfied with what it has and that is a stock market that has recovered 89% - 113% in two and a half years, depending on which yardstick you use.
For the most part, corporations are lean and mean, profitable and liquid, and the consumer is deleveraging - all good.
Based on what happened and is happening today in Europe, the stock market should still be probing for a bottom below DJIA 7,000.
We won’t see a roaring economy and stock market for quite some time, maybe not for a couple more years, BUT there will be pockets of strength in new industries, old industries on the rebound. Stocks that have had a good run will get whacked by profit taking, enabling new investors to buy in at prices that afford appreciation potential.
Volatility will continue as long as there is a crisis that creates fear and uncertainty.
Nimble traders, quality investors and market timers will find this an attractive market.
Chasing stocks after a big run will punish buyers. A cash reserve in line with one’s tolerance for risk is imperative as a safety valve and as a ready reserve to capitalize of special situations and market declines.
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. 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”
Oct. 21, DJIA 11,541, “DJIA 12,000 “IF” the Europeans Can Get It Right”
Oct. 24, DJIA 11,808, “Euro-Solution Announcement After Wednesday’s Meeting”
Oct. 25, DJIA 11,913, “Short-Term Euro-Solution Doesn’t Cut It”
Oct. 26, DJIA 11,706, “Ball’s in Europe’s Court”
Oct. 31 DJIA 12,208, “Buyers on Dips. Euro-Deal to Hit Some Snags
“Doomsters and Shorts Out in Force”
Nov. 2 DJIA: 11,637, “Risk-Taker’s Buy Shaping Up”
Nov.3 DJIA: 11,836, “Again – It’s All About Europe”
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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