Investor’s first read – Brooksie’s edge before the open
Friday, June 15, 2012 8:21 a.m. ET
S&P 500: 1329.10
Nasdaq Comp.: 2836.33
Russell 2000: 762.34
Yesterday’s surge in prices was yet another example of how volatile trading has gotten as some investors reacting to news and expectations hurriedly buy one day, then others sell the next, producing big swings in both directions.
Yesterday, I expected a “wait and see” market, but was wrong. It jumped sharply. While that volatility was part of the prevailing “whipsaw” nature of trading, it may be telling us something.
Without question, our economy is slumping. Part of that is seasonal, part is normal in a bumpy recovery after a severe recession.
Both the Producer Price and Consumer Price Indexes showed a negative rate of growth in May.
Investors are now expecting the Fed to take measures to stimulate the economy – that’s why they are buying bad news, not selling it.
It’s a mindset – whether you agree or not. If the Fed is goosing the economy, investors are optimistic.
The Greek elections Sunday may determine if they stay with the euro, or enter contentious bargaining sessions about austerity.
The Group of 20 meet Monday and Tuesday, but it is unclear what they can do to help Europe’s sovereign debt problems.
If European leaders have developed a plan to address a Greek exit, next week would be a good time to unveil it.
This has gone on for more than two years, they sure as Hell should be prepared for anything.
Presently, I don’t expect a catharsis in the market until fall.
But I don’t move markets, the BIG money does. If they look out months ahead and see some clarity, they will buy ahead of the kind of “comfort” news individual investors have been hoping for.
If the result from the Greek election Sunday indicates it will stay with the euro, Monday could be a big up-day at the open – be prepared to SELL it within the first 25 minutes of trading. We’ll deal with that Monday.
Facebook (FB): Yesterday, I said I would cover “some” shorts if I had any, and I think some investors did. Upside here is 30,36. A rally failure would be worth serious concern. You see, shorts had a nice gain, but if some cover, others will become fearful the stock will run on them and they too will cover, ergo a nice bump.
TODAY: Possible spike to DJIA 12,766 (S&P 500: 1343). However, odds favor the market will give most of it back by the close.
ECONOMIC REPORTS: With economies in Asia and Europe sagging, the Street is watching to see which direction the U.S. economy will take.
Will this trigger QE3 by the Fed.?
NFIB Small Business Optimism Index (7:30): The Optimism Index slipped slightly in May 0.1% to 94.4. Employers continue to have difficulty finding qualified people to hire.
Import and Export Prices (8:30): Lower energy and food prices contributed to the largest drop in two years. Overall May import prices declined 1.0% vs no increase in April.
Treasury Budget (2:00p.m.): April posted a $59.1 billion surplus, the first in 3 ½ years bringing the year-to-date deficit down to $719.9 billion well below the year ago deficit of $869.8 billion.
Producer Price Index (8:30): Dropped 1.0% vs. a 0.2% decline in April as a result of plunging energy and food prices.
Retail Sales 8:30): Decline 0.2% in May vs. a decline of 0.2% in April.
Business Inventories (10:00): Inventories rose 0.3% in March as sales rose 0.6%. The inventory-to-sales ratio stands at 1.27
Jobless Claims (8:30): Claims fell 6,000 to 386,000 from a revised 380,000. for the June 9 week.. The 4-week average in 377,750
Consumer Price Index (8:30): Declined 0.3%, excluding food and fuel it rose 0.2%.
Empire State Manufacturing Index (8:30): The Index rose 10.53 points to 17.09 in May. New Orders were up to 8.32 from 6.48 after a strong increase in shipments.
Industrial Production (9:15):Jumped 1.1% after a 0.6% drop in March.
Consumer Sentiment (9:55): Index was up 3 points in May to 79.3 from April.
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.