I told readers yesterday to be on the alert for a “stall” as stocks ran into headwinds after a sharp rally that started Monday. a rally failure. We got a stall, but it was not the kind of dramatic rally failure that marks a clear-cut top.
The bulls are still in control. Money from all sources must be put to work.
Nevertheless, the slaughter of selected blue chips continues with MMM (MMM) down 2.99 (2.7%) and Qualcom (QCOM) down 3.56 points (5.4%). Of course, there were offsetting gainers, but there is a message here. The market may be able to post gains, but there is risk, even in the bluest of chips.
The Q1 GDP came in at 8:30 and indicated the first quarter grew at a 2.5% annual rate, below the 3% forecast by many economists, which may have a temporary affect on the market. There will be revisions up or down in coming months.
If the auto-pilot buyers back off today, we should get a drop to DJIA 14,605 (S&P 500: 1,574).
Investor’s first read – an edge before the open
S&P 500: 1,585.16
Nasdaq Comp.: 3,289.98
Russell 2000: 940.28
Friday, April 26, 2013 (9:12 a.m.)
SEQUESTER: Stay tuned, it is starting to hit.
At some point, the question will be raised about the sequester’s impact on the economy, notwithstanding the uncertainty it brings to persons at risk, directly and indirectly.
It is too early to expect anything to show up in the indicators, and it may never be a major issue if our economic recovery gains traction.
It is one of those potential negatives one has to consider along with other ingredients that lead to a decision to buy or sell.
Employers (government or private) may opt to furlough employees without pay, cut back on hours rather than release them to unemployment at the expense of the government. Even so, several weeks without pay has an impact on the economy.
This is one of those uncertainties that, along with a few others, can trigger a consolidation or pullback in the stock market.
Apple (AAPL: $408.38) Still decision time.
No decision yet, the numbers guys are still crunching. What they got is not what they were looking for ! The Street has dividend stocks, lots of them. They want new products that grow revenues and earnings and assert the company’s industry leadership. Later this year or 2014 doesn’t cut it.
AAPL needs to break out above resistance between $410 and $414 to reduce the risk of another leg down.
A break above $421 improves the pattern and a break above $430 even more, but that will take a big buyer.
It’s not that its 43% plunge hasn’t discounted the sharp slippage in its growth rate and new product introduction. It is a value here. The problem is, does it represent enough upside to attract serious buying, or does it have to probe lower to find that kind of interest ?
I feel it is enough of a value to own some but not a lot of its stock, since there is a risk of another leg down.
I am not long or short AAPL.
FACEBOOK (FB - $26.14)
It looks like FB is off to a good start today with a breakout above $2650 and a move across $27.
Between Aug. and Dec. last year, a trading range between$18 and $24 developed. That should provide support for FB and a buying opportunity. That’s where a three month tug of war took place between the believers and non-believers.
I am not long or short Facebook.
Investors will be looking for assurance this week that the economy is not weakening seriously. Reports from the primary driver of our recovery, housing, will come Monday and Tuesday. Due to strong numbers in February, analysts are revising Q1 GDP estimates upward, some to 3%.
Consumer Sentiment (9:45)
“Investor’s first read – an edge before the open”
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