Investor’s first read – Brooksie’s edge before the open
Tuesday, April 24, 2012 9:10 a.m. ET
DJIA: 12,927.17
S&P 500: 1366.94
Nasdaq Comp.: 2970.45
Russell 2000: 791.85
It wasn’t pretty, but yesterday’s market could have been uglier. I mentioned technical negatives such as the end of the “Best Six Months” for owning stocks and a possible Head & Shoulders Top forming as something to be concerned with.
Combined with renewed concerns about Spain’s sovereign debt woes, and worries about the sustainability of the U.S. economic recovery, the market is floundering and so far Q1 earnings are not much help.
Not much we can do about Europe except hope its leaders are better prepared for addressing Spain’s woes. At times, it could get scary (again).
Our biggest hope is that the recovery here in the U.S. will override recessions in certain European countries.
Politically, there is nothing to look forward to unless you are an Ultimate Fighter fan. Fingers will be pointed, characters smeared, accusations levied and our future portrayed as glum en route to hopeless, hardly the atmosphere for a surging bull market.
The GOOD NEWS is all this sets the foundation for an opportunity to buy at attractive prices. Bad news, even uncertainty, enables the market to find a comfort level that discounts current and foreseeable negatives.
We have been experiencing a giant tug of war over the last three months with moves that beyond a doubt (?) promised much higher or lower prices only to reverse unexpectedly in the other direction. A breakout in March was reversed entirely in April and today we are at risk of a further breakdown to lower prices.
During yesterday’s plunge, DJIA did not penetrate April’s lows (12,690 intraday); the S&P 500 bounced off them (1357) by a hair. The Nasdaq Composite cracked below April’s low (2,975), and the Russell 2000 barely held.
TODAY: It looks like yesterday’s decline didn’t clear the air yesterday as U.S. stock-index futures gave up a bounce before 9 a.m.. New Home Sales and Consumer Confidence will be reported at 10 o’clock today, Durable Goods at 8:30 tomorrow, then comments by the Fed after 12:30. Apple (AAPL) will report earnings after the close today. While expected to be good, it trades lower before the open. It’s size in market cap can skew the Nasdaq Composite Index.
FOR YOUR NOTEBOOK: Beware of conclusions based on percent changes. Always look back to note when the base number used occurred. A crafty analyst can tout any conclusion using a base of his choice to support a preferred conclusion.
Example: CNBC made its case today that the DJIA was only up 4% vs a year ago. Indeed, it is ONLY up 4% since last April but that is when Congress threatened to plunge the nation into default and Europe threatened to stumble into oblivion. Those developments crushed stock prices in the interim as the DJIA plunged 19% in six months. Since then, the DJIA has recouped all that loss (plus 4%). Beg pardon, CNBC but you buried your lede. The stock market survived yet another crisis and rebounded, which speaks volumes for our system. Here’s a good example of either inaccurate reporting, or possibly an effort to put a negative spin on the market’s progress, hoping that an unsuspecting viewer won’t “get it.”
ECONOMIC REPORTS
Again, the flow of economic reports will be important this week because the Street is concerned that the economy is slowing.
TUESDAY
Case Shiller Home Price Ix (9:00) – a 20-city house price index was unchanged in January following a 0.5% drop in December
New Home Sales (10 a.m.)Fell 1.6% in February to a 313,000 annual rate after increases of 5.4% in January and 4.3% in December.
Consumer Confidence (10 a.m.) – dropped to 70.2 in March from 71.6 in February.
FHFA House Price Ix (10 a.m.) – unchanged in January after a 0.1% increase in December.
WEDNESDAY
Durable Goods (8:30) – February orders rebounded 2.4% after a 3.5% decline in January and 3.3% increase in December.
FOMC Meeting Announcement (12:30) – is expected to leave policy rates unchanged, but the Street will be focused on comments by Fed officials after the meeting for any clues about a change in policy going forward.
THURSDAY
Jobless Claims (8:30) – declined 2,000 to 386,000 in the April 14 week, after a sharp jump of 26,000 (revised up by 8,000) the prior week. The four-week average is now 374,750.
Pending Home Sales (10 a.m.) – dropped 0.5% in February after a 2.0% rise in January.
FRIDAY
GDP (8:30) – Q4’s GDP’s last estimate was a plus 3%. Q3 was 1.8%.
Employment Cost Ix (8:30) – a measure of the total employee compensation costs, including wages, salaries and benefits. It rose 0.4% in Q4 vs, a rise of 0.3% in Q3.
Consumer Sentiment (9:55) – The index slid to 75.7 in mid-April from 76.2 in March
George Brooks
*Stock Trader’s Almanac. You should not be without this statistical gem and reservoir of investing savvy. Got my first issue in 1968 and every one since.
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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.
