George Brooks: Impressive But Not Reason to get Careless

George Brooks |

There have been four brief attempts to sell off in the stock market over the last nine days, all followed by rebounds. Investors are faced with a host of uncertainties as we head into the open today, yet the stock-index futures only indicate a mixed-to-slightly down market in initial trading.

That’s impressive, but not reason to get careless.

Brooksie’s Daily Stock Market Blog: An edge before the open.

Tuesday, April 5, 2011

DJIA: 12,400.63
S&P500: 1332.87
Nasdaq Comp.: 2789.19
Russell 2000: 849.36

We get the ISM non-manufacturing survey at 10 o’clock. While it is expected to approximate February’s 59.7 reading, it is still ramping at a strong pace, indicating the nation’s economic expansion in services is matching that in manufacturing.

I get the sense the Fed is becoming increasingly concerned that the surge in commodity prices will have more than a transitory (temporary) impact on the economy, which means in his words it will have to “respond to that and ensure that we maintain price stability.”

Too early to tell, but the Fed may be easing into a change in policy now that it acknowledged at its March 15, FOMC meeting that the economy is on a “firmer footing.” This possibility should be added on the list of risks going forward. Bull markets can proceed in face of rising interest rates, but not in face of a Fed policy that is designed to stop runaway inflation in its tracks.

The BIG money will anticipate a change in policy in advance and lock-in profits and defer additional purchases, triggering a plunge in the stock market. The news of a change in policy will come later.

I’m not BIG money, and clearly do not have the “inside” it has. I am throwing this out there as a consideration - better early than too late.

On the positive, let me remind you that this is a pre-presidential election year and according to the score keeper of a host of invaluable stock market patterns, there have been no losers in 72 years.

Year-end close December 2010:
DJIA: 11,577.51
S&P 500: 1257.64
Nasdaq Comp.: 2652.87
Russell 2000: 784.95

George Brooks
sensiblesleuth@gmail.com

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Companies

Symbol Name Price Change % Volume
REI Ring Energy Inc. 10.42 0.26 2.56 42,685

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