Investor’s first read - Brooksie’s edge before the open
Friday, August 24, 2012 8:50 a.m.
S&P 500: 1402.68
Nasdaq Comp.: 3053.40
Russell 2000: 806.00
Yesterday I headlined my post, “Correction to Follow Fed Stimulus Announcement ?” and I want readers to entertain that possibility in coming weeks in case the market presses to new highs in anticipation of Fed action.
The market has already posted a solid gain in anticipation of Fed stimulus.
I am heartened by the fact the Fed will attempt to head off a recession, enable a decrease in the unemployment rate, but I feel their action will only reduce the severity of a contraction.
Reality is, global economies are struggling to recover from a near total meltdown across the board. That takes time, and there are no guarantees the world won’t slide into another recession – none !
That said, it makes sense that if the market is hoping for Fed action and discounts that by rising, the announcement by the Fed leaves little upside to celebrate – on the order of, “Buy the rumor, sell the news.”
While an announcement may be weeks away, it is well worth giving thought to now in the event the market takes off again, because emotions will run high on the day of the announcement and selling may be far smarter than buying.
Yesterday the market touched support at DJIA 13,070 (S&P 500: 1398). I can see a remote possibility of a rebound today to DJIA 13,143 (S&P 500: 1411), then s sell off before the weekend.
Yesterday I said FB to move up to $19.77, stall, then sell off into the weekend. It stalled at $19.73 then drifted off giving back all of its small gain for the day, even with an announcement it was updating its application for Apple’s iPhone and iPad.
Without major buyers, FB will have to continue to probe for a level where buyers meet sellers head-on, setting the stage for a base from which it can recover over time.
A bottom can also occur as the result of a selling climax, a one-day reversal on huge volume, which is what I have been expecting.
This is the week I said FB would hit its low. So far I am spot-on except for two things. It plunged as expected, but didn’t drop sharply enough (my forecast $16.88) and didn’t get that deck-clearing volume it takes to shake the tree of all its sellers.
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.
ECONOMIC REPORTS: Light week for economic indicators.
Chicago Fed National Activity Index (8:30): An index of 85 national macroeconomic indicators released monthly. July’s index slipped to 0.05 from 0.02, but 49 of the 85 indicators used were positive, 36 negative.
Existing Home Sales (8:30): Increased 2.3% to a 4.47 million annual rate. Estimates ranged between 4.3 million and 4.8 million. The median price of an existing home rose 9.4% to $187,000 from $171,000 a year ago.
Jobless Claims (8:30): Up 4,000 for the Aug. 18 week to 372,000 bringing the 4-week average up 3,750 to 368,000.
PMI Manufacturing Index (9:00): Index was up to 52.4 in August from 51.9 in July. New Orders were up 1.6 points to 52.6 from 51.0 in July.
New Home Sales (10:00): Dropped 8.4% in June after a gain of 6.7% in May and 1.7% in April.
FHFA House Price Index (10:00): Increased 0.7% in June and 3.6% year over year.
Durable Goods ( 8:30): Increased 4.3%% in July after a 1.5% increase in June. Ex-transport Durable Goods were down 0.4% vs. a decline of 2.2%. Aircraft was the big contributor.
Aug 2 DJIA 12,976 “Recovery Sucking Wind, Not Tanking”
Aug 3 DJIA 12,976 “What This Market Needs”
Aug 6 DJIA 13,092 “NEXT ! Sequestration”
Aug 7 DJIA 13,117 “Is The Light Green Enough ?”
Aug 8 DJIA 13,168 “Facebook Testing Lows”
Aug 9 DJIA 13,175 “Alert: Congress Seeking Wiggle Room”
Aug 10 DJIA 13,165 “ Correction to Test BIG Money’s Interest”
Aug 13 DJIA 13,207 “Market Needs More Aggressive Buying to Move Higher”
Aug 14 DJIA 13,169 “Big Money Will Call the Shot”
Aug 15 DJIA 13,172 “Wall Street Quandry”
Aug 16 DJIA 13,162 “Market in Limbo – Big Day for Facebook”
Aug 17 DJIA 13, 250 “Facebook Bottom Imminent - $16.88 Worst Case ?”
Aug 20 DJIA 13,275 “Odds Favor Facebook Bottom This Week -$16.88
As BIG Money Steps In ?”
Aug 21 DJIA 13,271 “Facebook: Selling Climax to New Low, or Will BIG Money
Step In ?
Aug 22 DJIA 13,203 “Facebook Probing for a Bottom?
Aug 23 DJIA 13,172 “Correction to Follow Stimulus Announcement ?”
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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