Investor’s first read – an edge before the market opens
Highlights: Global stimulus, homeowner wealth effect, monster bull market, presidential debates.
DJIA: 13,610.76
S&P 500: 1461.05
Nasdaq Comp.: 3182.62
Russell 2000: 856.08
Investors must balance the worsening economic reports worldwide against news that the United States, Europe, China, Japan, Canada, India and Brazil have launched efforts to stimulate their respective economies. Obviously, if most nations fail we have a global recession.
But, what if most nations succeed? The economic impact on the United States stands to be huge. That’s the ticket to a monster bull market. Hard to believe? Yes, absolutely!
And that’s a good reason to put it on your list of highly possible. While the elections contribute to uncertainty, the fiscal cliff possesses the potential to be the biggest obstacle for near-term appreciation. With the first of four debates between President Obama and candidate Romney is scheduled for October 3, less than two weeks from now. By then, the horrors of the fiscal cliff will be Page One.
It is important to note, though you won’t hear it from the media, there is wiggle room for Congress here in terms of the deadline.
TODAY: Yesterday’s rally hit targeted resistance and backed off. The sell off will continue into the open today. Risk now is DJIA 13,405 (S&P 500: 1443).
FACEBOOK (FB) – $23.29:
Today: Volume pick-up suggests short-covering along with buyers who missed FB below$20 and “just have to own it !”. At some point we should see a pick up in selling from profit-takers who bought FB at lower prices and sellers who were alarmed by its drop below $18 and are going to use this rebound to lighten up. Support is $22.38. Resistance is $24.68.
I think I have achieved the goal that I set in May, that is to offer daily guidance for followers of FB starting at $34 on May 21 with my warning about a drop to the $24 – $26 area, 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 for the stock at $16.88.
On September 4, it hit $17.55. I plan to cut back on coverage, commenting on occasion when I think it would be helpful. 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 I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. At some point, I will drop coverage. I would like to see readers through the full cycle, from the $34 where I picked it up as “going lower” down to a bottom.
ECONOMIC REPORTS: I will post the following list of reports on Monday only, then follow up with an update of a report where appropriate. I suggest you visit “mam.econoday.com” if you are interested in economic reports – an excellent website which posts on Sunday along with national and international summaries..
MONDAY:
Empire State Mfg Svy (8:30) – Dropped to a minus 10.41 in September after a 13-point drop in August to minus 5.85. in August, New Orders also dropped to 14.03 from minus 5.50.
TUESDAY:
Housing Market Ix (10:00) – Rose for the 5th straight month in September to 40.0, ahead of forecasts for 38.0.
WEDNESDAY:
Housing Starts (8:30) – Rose 2.3% in August to an annual rate of 750,000 from a revised 733,000 units. Forecast was for a gain of 765,000 units. Permits slipped 1.0% to 803,000 units after a July surge.
Existing Home Sales (10:00) – Rebounded 2.3% in July to a 4.47 million annual rate reversing a 5.4% drop in June.
THURSDAY:
Jobless Claims (8:30) – Declined 3,000to 382,000 for the week ended Sept. 15, The 4-week average is now 375,000.
Markit PMI Mfg flash In. (9:00) – Final Aug. index was revised down 0.4 points to 51.5.
Philadelphis Fed Svy (10:00) –Improved to minus 7.1 in Aug. from minus 12.8 in July
Leading Economic Indicators (10:00) – Rebounded 0.4% in July after a drop of 0.4% in June.
Note: Economic data above is subject to revision, so what you see as the latest reading may change in the next report.
George Brooks
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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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