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Europe and China Stimulating Economies – U.S. Next?

Investor’s first read - Brooksie’s edge before the openFriday, September 7, 2012 9:13 a.m.DJIA: 13,292.00S&P 500: 1432.12Nasdaq Comp.: 3135.81Russell 2000: 836.81The Employment Situation

Investor’s first read – Brooksie’s edge before the open

Friday, September 7, 2012 9:13 a.m.
DJIA: 13,292.00
S&P 500: 1432.12
Nasdaq Comp.: 3135.81
Russell 2000: 836.81

The Employment Situation report came at 8:30 this morning showing 96,000 jobs created in August, well below an estimated 125,000. Private sector jobs were up 108,000 vs. a gain of 162,000 in July.

The Unemployment Rate dropped to 8.1% from 8.3%, a statistical glitch related to fewer workers in the workforce.
Listen, these numbers are anxiously awaited every week, some every month, and they move markets. But revisions are frequent and often significant.

What I see here is enough softness to suggest the Fed will opt for stimulus at its FOMC meeting on the 12th or 13th. What we would have then would be both the U.S. and Europe stimulating their economies. China is doing likewise.

This is global. If efforts fail, we have a recession, maybe a big one. If efforts succeed even marginally, time is bought for a recovery from the worst economic/financial calamity since the 1930s. This takes time. A lot of damage was done between 2006 and 2009.

But global leaders responded and odds strongly suggest their efforts will succeed. There is a question whether the stock market has gotten ahead of that progress. That is what is being debated here between buyers and sellers.

Right now, bad news may be perceived as good news, simply because the Street wants the Fed to go the stimulus route.

Once beyond September 13, and assuming the Fed acts, bad news will be bad and good news good. Yeah, I know, sounds like these people are whackos at times. Between the two of us, based on 50 years experience in this business, at times, they are.

Any upside here will be in anticipation of a Fed decision to employ measures to stimulate the economy next week, but we had a big pop yesterday, so a correction today would be normal.

FACEBOOK (FB) at $18.975:

The recent announcement, termed a “buyback” prompted a rally. Without believable news about management’s ability to monetize its user-base, I don’t expect the bounce to translate into anything more than a move to $19 – $20 where there is a lot of overhead supply.

Volume will tell the story. A huge influx of buying suggests Tuesday’s low of $17.55 was FB’s bottom. Without that, FB will test that low.

FB is on all big investors’ radar screens. The company is like a “lock to a door to huge opportunity” but without a key that fits. It needs a locksmith, and one will come forth in the form of one or several solutions that tap its potential.

Until that happens the tug of war between buyers and sellers will continue as the stock seeks a comfort level.
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. At some point, I will drop coverage. I would like to see readers through the full cycle, from the $34 where I picked it up as “going lower” down to a bottom.

George Brooks
*Stock Trader’s Almanac: More on this in coming weeks.
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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