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George Brooks: BIG Money Buying?

Yesterday’s “Up – Down – Up” didn’t have a chance, trumped by a worsening in risks rising from Japan’s Fukushima nuclear power plant as well as, ugly reports for February Housing

Yesterday’s “Up – Down – Up” didn’t have a chance, trumped by a worsening in risks rising from Japan’s Fukushima nuclear power plant as well as, ugly reports for February Housing Starts and Wholesale Prices.

However, this can still be a week of opportunity for more than gutsy traders as noted Monday and Tuesday !

The stock-index futures are ahead prior to the open, suggesting some traders are hedging their bets just in case attempts to cool nuclear reactors at Fukushima succeed.

Yesterday, I headlined an “Up-Down-Up” day. It’s possible we will get that today. It is so dependent on the status of Japan’s Nuclear power plants. If the rally at the open has legs, I expect it could get close to DJIA 11,800 (S&P500: 1278) before pulling back. That pullback must be scrutinized. If unimpressive (i.e. holds at 11,700) , we have more on the upside.

All depends on Japan’s news.

Brooksie’s Daily Stock Market blog
-an edge before the open

Thursday, March 17, 2011 9:20 am EDT

DJIA: 11,613.30
S&P500: 1256.88
Nasdaq Comp.: 2616.82
Russell 2000: 781.90

Buying here is really up to an investor’s tolerance for risk.

At this point, no one knows how Japan’s nuclear crisis will play out, or the consequences of a worst case scenario. So far all the news has been bad, getting worse.

This week’s economic reports are key. They cannot disappoint !

So far, so good. The February CPI, at plus 0.5% (vs0.5% Jan.), was not bad and the Jobless Claims for the week ending March 5 were down 16,000 to 385,000, also OK. Industrial Production will be released at 9:15 after I post this blog.

That leaves the Leading Economic Indicators and the Philly Fed (regional economic) Survey to be released at 10 o’clock.

Yesterday’s report of a 23% plunge in Housing Starts and a 1.6% increase in February Wholesale Prices that exceeded projections were upsetting, as well. The drop in Housing Starts follows a 14.6% increase in January. Building permits, a leading indicator, dropped 8.1% . Winter snows are partly to blame.

This all started out as a normal technical correction to a sharp run up in the stock market since late August. The major market averages dropped to reasonable support levels, but were clobbered by a host of negatives starting with Libya, higher oil prices and Japan’s disasters. That’s how small corrections become big corrections – bad things happen along the way.

The market’s attempt to rebound down here must be scrutinized.

When attractive stocks take a hit and can’t bounce, it is necessary to step back and ask – Why ?

It’s my old soggy playground softball analogy (dead cat if you prefer) – no bounce.

However, if the bounce resembles a golf ball (silly putty if you prefer), the bull is back.

What are the quant’s computers thinking ? Were they ever programmed for an unthinkable combo – earthquake/tsunami/potential nuclear disaster ?

George Brooks
[email protected]

*The DJIA is not analysts’ preferred market barometer for the stock market. It is comprised of 30 stocks, unlike the S&P Composite’s 500 stocks. Nevertheless, it is the market average you will see in news headlines and most familiar to the public. Also, most of its 30 stocks are among the top contributors to moves in the S&P.

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