So far, the market is telling us a framework for addressing the fiscal cliff and debt reduction going forward will be announced before year-end.
While news headlines say it won’t, the market is usually right.
I agree with the market, but have expected more volatility to accompany all the verbal jousting in Washington.
I expect the lame duck Congress to agree on a framework for avoiding the fiscal cliff, with details hashed out by the new Congress next year. I expect it to be taken right down to the wire, even if President Obama has to call Congress back into session over the holidays.
Today the market is obviously responding to the Sunday appearance on five morning talk shows by U.S. Treasury Secretary Timothy Geithner, who predicted Republicans would agree to raising taxes on incomes exceeding $250,000 to avoid the fiscal cliff January 1, 2013.
Investor’s first read – an edge before the market opens
S&P 500: 1416.18
Nasdaq Comp.: 3010.24
Russell 2000: 321.92
(Monday, December 3, 2012 (9:08 a.m.)
While the Street’s prime focus is on the fiscal cliff debate, it is important to keep track of the economy. This is a big week for economic indicators (see calendar below), though some will still be negatively impacted by Hurricane Sandy.
The shortfall in tax receipts by the U.S. government resulting from the Great Recession/bear market was a contributor to the increase in our debt. The current economic recovery will help offset government spending, aiding efforts to reduce our deficits.
TODAY: Momentum gained by Geithner’s Sunday prediction will push stocks higher to my secondary resistance levels of DJIA 13,155 (S&P 500: 1429). I am adjusting the S&P resistance higher, since it is in catch-up mode to the DJIA.
FACEBOOK (FB – $28.00): FB broke through a resistance area Friday that should have stopped its rise and it did so on increased volume. This area represented 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. “Market Watch” recently attributed recent strength to better-than- expected sales and earnings reported October 23 and three brokerage upgrades.
At some point, FB’s stock will need to consolidate its gains over the last 12 days. It’s possible some of the hurried buying is short covering, How much of the 773 million shares coming out of IPO lock-up in early November have been sold is uncertain at this time. At the time, the stock was trading between $20 and $21. If there is a large chunk of stock unsold, these higher prices may flush them out, putting a lid on the stock’s rise, even trigger a sharp correction.
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.
Note: I am going to list the economic reports but not include the numbers from the last report, since those numbers are often revised and therefore potentially misleading.
I suggest you access the website: www.mam.econoday for details reports on this week’s calendar and an excellent recap (plus graphs) of last week’s reports.
PMI Mfg. Ix (8:58)
ISM Mfg. Ix, (10:00)
Construction Spending (10:00)
ICSC Goldman Store Sales (7:45)
ADP Employment Report (8:15)
Productivity and Costs (8:30)
Factory Orders (10:00)
ISM Non-Mfg Ix. (10:00)
Jobless Claims (8:30)
Bloomberg Consumer Comfort Ix, (9:45)
Employment Situation (8:30)
Consumer Sentiment (9:55)
Nov 7 DJIA 13,245 “Game Time ! Fiscal Cliff Next”
Nov 8 DJIA 12.932 “Choppy Down, but Buying Opportunity Coming”
Nov 9 DJIA 12,811 “Trader’s Buy, but…..”
Nov 12 DJIA 12,815 “Cool It !”
Nov 13 DJIA 12,815 “Beware of News Whipsaw”
Nov 14 DJIA 12,756 “Cliff Hanger – News Whipsaw to Roil Markets”
Nov 15 DJIA 12,570 “Traders: Lock and Load”
Nov 16 DJIA 12,542 “Classic Selling Climax Shaping Up”
Nov 19 DJIA 12,588 “Framework for Fiscal Cliff This Week ? Careful”
Nov 20 DJIA 12,795 “Beware of News Whipsaw”
Nov 26 DJIA 13,009 “Market Cannot Afford a Disappointment on Fiscal Cliff”
Nov 27 DJIA 12,976 “Market Rising Into Resistance”
Nov 28 DJIA 12,878 “Cruel “News Whipsaw” to Increase Volatility”
Nov 29 DJIA 12,985 “Traders’ Sell – More News Whipsaw Likely”
Nov 30 DJIA 13.021 “Face-Saving Fiscal Cliff Negotiations a Drag on Everything”
“Investor’s first read – an edge before the open”
The writer of Investor’s first read, George Brooks, is not registered as an