Investor’s first read - Brooksie’s edge before the open
Wednesday, August 22, 2012 9:09 a.m.
S&P 500: 1413.17
Nasdaq Comp.: 3067.26
Russell 2000: 815.36
A correction started yesterday that can carry down to DJIA 13,070 (S&P 500: 1398) this week. The Fed will hold the spotlight today with the release of commentary on its FOMC meeting at 2p.m. today.
The market has sketched out a favorable pattern of trading, but one which yield to healthy corrections that enable institutions to buy on pullbacks.
While we may see a rally this afternoon, I think the market will trade lower by the end of the day.
What could change this ?
The Fed !
Facebook (FB: $19.16)
A bounce in FB’s stock early yesterday was met by sellers, but for the rest of the day its stock edged down grudgingly as if buyers were there to catch any stock for sale each penny per share lower. I call this phenom, a “controlled correction” since it often precedes a rally, i.e. buyers are interested but will absorb as much selling as possible so long as they can buy at lower prices. As soon as the selling dries up, the buyer steps in and buys aggressively.
In light of all its bad press and newly freed potential sellers via the end of IPO lockup, FB may not fall into this category.
I do think we have entered an area where buyers are beginning to meet sellers head-on to create a “basing” process.
Since August 2, I have targeted $16.88 as the low and expected it to occur on huge volume, in excess of 300 million shares.
I have targeted this week as the week that bottom occurs – no change there.
CONCLUSION: I would be suspicious of a rally here unless it occurs on thunderous volume. A rally failure (slippage after a rally) suggests new lows.
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): Dropped 5.4% in June to an annual rate of 4.37 million homes. Sports a year over year gain of 7.9% with the median price of a hous now $189,400.
Jobless Claims (8:30): Up 2,000 for the Aug. 11 week to 366,000 bringing the 4-week average down 5,500 to 363,750.
PMI Manufacturing Index (9:00): Index was 51.4 in July down from 52.9 in June. New Orders were 51.0 vs, 51.9.
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 0.8% after a 0.7% increase in April. Year over year gain is 3.7%. in May.
Durable Goods ( 8:30): Increased 1.3% in June after a 1.5% increase in May. Both defense and nondefense aircraft orders rose, motor vehicle sales declined. Ex-transportation orders dropped 1.4%
July 12 DJIA 12,609 “June 4 Rebound “Must” Hold or Else !”
July 25 DJIA 12,617 “June 4 Lows at Risk”
July 26 DJIA 12,676 “Don’t Buy the Open”
July 27 DJIA 12,887 “Facebook Selling Climax Monday ?”
July 30 DJIA 13,075 “Market Betting the Fed Will Act”
July 31 DJIA 13,073 “Face-off: Negatives and Uncertainties vs. Positives”
Aug. 1 DJIA 13,008 “Fed Action Hoped For”
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 13,271 “Facebook: Selling Climax to New Low, or Will BIG Money Step
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.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer