Wednesday, April 13, 2011 9:23 am EDT
S&P 500: 1314.16
Nasdaq Comp.: 2744.79
Russell 2000: 822.44
This market needs some earnings surprises – soon !
I believe this market was anticipating good Q1 reports. I expected the BIG money to sell into those reports, especially in cases where there was a significant “uncorrected” rise in a stock.
Fast money doesn’t waste time hitting the exits.
We have had what I refer to as a greenstick fracture, a “technical” warning that the market is vulnerable to a further decline. A 3% - 5% decline would be tolerable. The DJIA and S&P 500 are already down close to 2%. However, if the reason for the decline is more deeply based or new negatives hit it when it is ready to rebound from this correction, it can get ugly.
Today: The pre-open U.S. stock-index futures aren’t suggesting a correction is anywhere in sight with the prospect of a gain in the DJIA of 115 points by 10:15.
It is critical that the market hold its gains for the day. A rally failure would suggest more downside. This is not a time to close your eyes and swing.
A normal technical correction, assuming no new negatives would find support at:
Nasdaq Comp.: 2745
Russell 2000: 825
Add new negatives + uncertainties and you get:
Nasdaq Comp.: 2680
Russell 2000: 800
We now have a band of overhead supply (real and potential selling), starting at DJIA: 12,360, S&P 500: 1324, Nasdaq Comp.: 2770, Russell 2000: 834. A string of better-than-projected earnings could blow right through that supply.
A major confrontation over raising the nation’s debt limit is looming and sure to draw heavy debate in coming months. Failure to raise it would have dire consequences. Cutting expenses is only part of a solution.
I don’t know how ugly this can get, I don’t rule anything out.
Now that the Republican plan for deficit reduction has been aired, the President presents his plan today.
While it will contrast sharply with the Republican plan, it will give both parties a base for more specific debate. This could be a big positive, if solutions take precedence over posturing for the election in 2012.
The International Monetary Fund lowered its forecast for the growth of the U.S. economy this year, dropping it to 2.8% from 3.0% A Bloomberg survey of 70 economists estimated the U.S. economy will grow at a 2.9% clip this year and 3.1% next year.
Commodity prices have been surging, contributing to inflationary concerns. It is especially apparent at the gas pump. While I don’t see gas prices dropping soon, a plunge in other commodities can happen. If so, it would help calm inflationary expectations. I am not aware of anyone calling for a plunge in commodity prices, which is a damn good reason to give it a chance.
Last Thursday I said, “Technically, I am uneasy. It’s not the news that woke me at 3 a.m., it’s hard to finger. I am not afraid to play, I am inclined to sit close to the exit, and with some cash, just in case.”
Don’t know if any of you have a 3 a.m. indicator. It has its positives and negatives.
So much of this business is emotions (fear and greed). It is important to study and understand one’s own emotions as they relate to investing, especially at extremes ( an ugly crunch or euphoria, where you can’t wait for the market to open so you can count your gains !)
Aggressive investors with a bunch of bulls and bears behind them most likely have a 3 a.m. indicator. I view it as an “alert” more than a profound signal, but always take it seriously.
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