We definitely have a change in character. Until May 22, buyers were relentless, accumulating stocks as they rose , but especially when they dropped.
Since then, sellers sold as stocks were dropping, but especially on any rally.
Both the DJIA and S&P 500 ran into projected resistance yesterday and reversed to the downside.
More than three times as many issues declined than advanced on the NYSE, 2.3 times on Nasdaq.
Half the Dow 30 advanced, but only 5 of the top 40 Nasdaq stocks advanced and 2 of 18 leading S&P 500 advanced.
TODAY:
What looms as a risk here is a rally failure, a sharp jump in the market that runs into resistance, then gives back all its gain by the end of the day.
I can see a sharp bounce after early morning weakness to DJIA 15,105 (S&P 500: 1,623, or so. That may hold, but a further move up Friday may fail.
Nimble traders may eek out a quick gain if they catch th early morning drop, then sell at the open Friday.
CONCLUSION:
Odds favor a bounce in here, but the overhead supply is building.
The only thing that can loosen that overhead resistance would be reassurance by the Fed that it will not be backing away from its policy of low interest rates and economic stimulation (tapering) soon.
It is Tapering angst that is spooking global markets right now. We are now in a “news whipsaw” market, where a single comment from the Fed can either roil or uncoil the market. I am not a believer in “all-in” or “all-out” decisions under these conditions. Do it in pieces, some buying, some selling, if you must do something.
Investor’s first read – an edge before the open
DJIA: 14,995.23
S&P 500: 1,612.52
Nasdaq Comp.: 3,400.43
Russell 2000: 972.31
Thursday, June 13, 2013 (9:04 a.m.)
NOTE: I am considering adding stocks to this blog, but haven’t decided on a format. I picked up Facebook when it was $34 shortly after its $38 IPO because I thought it was enormously overpriced and wanted to target a bottom for its imminent decline, which I did at $18. Likewise, AAPL when it was in a tailspin at $540 late last year. I write this letter between 8:30 and 9:12 after reading morning news starting at 7 a.m. Overnight news can impact the market, as well as stocks, so I can’t work too far in advance. I like to get a look at pre-market trading in both the stock market and individual stocks per chance there is a change shortly before the open. This keeps commentary on stocks on a short leash !
Apple (AAPL: $432.19)
Broke support at $433 and is headed for $420 – $422.70, with a slight chance buyers will jump in around $426.
We hear a lot about new products, but nothing capable of moving the stock up meaningfully. Investors need to feel “something is about to happen.” Without the feeling of an urgency to buy, the stock will meander above $420.
FACEBOOK (FB – $23.77)
Yesterday, I said odds favor FB’s test of the $23 level is behind it, but that it would drop briefly to $23.66, which it did. It should find support here. Another drop in the overall market could take it a bit lower, but support should be good here.
ECONOMY:
We have a light schedule for economic reports this week. For access to information including charts and graphics go to www.mam.econoday.com . Great site !
THURSDAY:
Jobless Claims (8:30) Proj. 350,000 for week Jun 8
Retail Sales (8:30) Proj. +0.4% for week May 13
Import/Export Prices (8:30) Proj: flat
Business Inventories (10:00) Proj. +0.3%
FRIDAY:
Producer Prices (8:30) Proj. +0.2%
Current Account (8:30) Proj. minus $111.2 bil.
Industrial Production (9:15) +0.2%
Consumer Sentiment (9:15) Proj. 84.5
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.
