The stock market is acting as if the Street expects a “deal,” which means it is vulnerable to news that a deal is not even close. (“news whipsaw”).
Traders may opt to lighten up going into the weekend just in case the news greeting the market Monday morning is negative.
Disappointment now would initially take the market down to DJIA 12,895 (S&P 500: 1401).
Resistance starts at DJIA 13,075 (S&P 500: 1417). More optimistic statements could bump the market higher to DJIA 13,155 (S&P 500: 1423) – a stretch.
This whole fiscal cliff drama is part negotiation, part brinkmanship. So far, no one is blinking. It’s too early for a deal to be announced. Odds favor more “News whipsaw.”
Investor’s first read – an edge before the market opens
DJIA: 13,021.82
S&P 500: 1415.95
Nasdaq Comp.: 3110.03
Russell 2000: 823.20
(Friday, November 30, 2012 (8:58a.m.)
President Obama offered part of a deal yesterday, proposing $1.6 Trillion in new tax revenue, along with new stimulus and new debt ceiling parameters. Included were proposals to cut health care programs by $400 billion over 10 years and modest savings on farm subsidies, postal services, the extension of unemployment benefits, deferment of cuts in Medicare payments to doctors and help for homeowners in refinancing under-water mortgages.
Republications were quick to reject it until they see a proposal for more spending cuts.
If this was easy, we would have a deal by now. The economic and quality of life implications are huge, the political implications, sorry to say, are bigger.
Faces have to be saved and ideologies preserved. Any one slips up or is overly unreasonable are at risk in 2014’s mid-term election.
FACEBOOK (FB – $27.32): Acting like the pink rabbit beating on a drum FB keeps edging ahead. It has hit my resistance level at $27.33 and should consolidate recent gains before moving higher. This area represents a longer term resistance than those in the last 3 months, since the stock is rising to an area where it broke down sharply in July. Investors who rode out the drop to $17 are likely to be sellers, happy to get a second chance to sell. Investors who bought in after that plunge may want to clip a profit here. It has defied gravity which has suggested it should be weaker in face of the potential for selling from 773 million shares that recently came out of its IPO lock-up. “Market Watch” recently attributed recent strength to better-than- expected sales and earnings reported October 23 and three brokerage upgrades.
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 on May 21. I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, which it did shortly thereafter. Following a rally back into the 30s, FB dropped into the low 20s where on August 2, I forecast a low of $16.88. On September 4, it hit $17.55, its low since its IPO at $38. I’ll continue technical coverage for a while to accommodate readers.
George Brooks
“Investor’s first read – an edge before the open”
[email protected]
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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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