Headwinds for the Runaway Bulls?

George Brooks |

This is a big week for economic reports. Monday and Tuesday’s were:
Pending Home Sales jumped 1.5% in March on track to an increase of up to 7% over 2012. Sales are being held back by a limited supply, which stands to be good for home prices.
On a sour note, the Dallas Fed Manufacturing Index plunged in April to a minus15.6 vs. +7.4 in March. Economists were expecting the index to read +5.0. The biggest weakness was in new orders. The production index slipped to minus 0.5 from 9.9.
The S&P Case-Shiller Home Price Index for 20 cities rose 9.3% over a year ago.
The Chicago PMI (regional business) Index for April plunged to 49.0 from 52.4, but the Consumer Confidence Index jumped to 68.1 in April from 61.8 in March. The ICSC-Goldman Store Sales Index rose 0.4% from a week ago.
Thus far today: New hires as reported in the ADP Employment Report today fell short of projections, coming in at 115,000 hires vs. a projection for 155,000. The EmploymentSituation report comes at 8:30 Friday.
At 2:00 p.m., the FOMC will comment on it meeting this week. No major changes are expected.
TODAY:
The DJIA and S&P 500 rebounded off support yesterday, closing at their highs for the day on expanded trading volume.
Based on that close, the market should be up this morning, but is not. Anytime the market does not do what it “should” do, it is worthy of a second look.
The “Sell in May and Go Away,” bromide is starting to make its rounds. There is a seasonal pattern that suggests that investors should move toward the exits in May. The biggest reason for credibility here is that May is preceded by the “Best Six Months” * for owning stocks (November 1 to May 1). This is well documented in the Stock Trader’s Almanac.
The bulls may thumb their nose at it this year, as they have done at every other obstacle it their way this year. I have my doubts.
Support: DJIA: 14,763 (S&P 500: 1,588).

Investor’s first read – an edge before the open
DJIA: 14,839.80
S&P 500: 1,597.57
Nasdaq Comp.: 3,328.79
Russell 2000: 947.46
Wednesday, May 1, 2013 (9:12 a.m.)
SEQUESTER: Stay tuned, it is starting to hit. Erskin Bowles told CNBC Squawk Box this morning sequester is a “stupid” way to handle deficit reduction.
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: $442.78) Street likes it, question is – how much ?
AAPL’s $17 billion debt offering went smoothly today, as did the rise in its stock. Volume over the last 10 trading days has been very heavy, indicating buyers have stepped in to pick up any selling that has come down the pike and in fact powered its way back up from what looks like AAPL’s low for this down cycle.
AAPL has had rallies in the past that have been just as impressive price-wise but not with this much volume. It is what AAPL needed to flush out the persistent selling that has plagued the stock this year. Support now moves up to $423. It had no trouble plowing through resistance between $430 and $437 and is ready to attack the $455 - $458 area. Support is good at $434 - $436.
I am not long or short AAPL.
FACEBOOK (FB - $27.76)
FB reached the upper end of my target for Tuesday and is now on the threshold of $28. Support rises to $27.30.
I am not long or short Facebook.
ECONOMY:
Very big week for economic reports.
Investors will be looking for assurance this week that the economy is not weakening. Evidence is beginning to surface that sequester is impacting the economy.
WEDNESDAY:
ADP Employment (8:15): 155,000
PMI Mfg.Ix.(8:58): 52.0
ISM Mfg.Ix.: 51.0
Construction Spending (10:00): +0.6%
FOMC Announcement (2:00 p.m.)
THURSDAY:
Jobless Claims (8:30): 345,000
International Trade (8:30): -$42.4 billion
Productivity and Costs (8:30): +1.3%
FRIDAY:
Employment Situation (8:30): 153,000
Factory Orders (10:00): -2.8%
ISM Non-Mfg Ix. (10:00): 54.0
*Stock Trader’s Almanac
George Brooks
“Investor’s first read – an edge before the open”

sensiblesleuth@gmail.com
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The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

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