A series of buying opportunities are shaping up. Expect false starts in response to reports of “a deal” on the fiscal cliff, followed to denials that one is near. In the interim, the market will probe for a level that discounts uncertainties about the cliff, as well as any “new” concerns. Buying juncture possible before year-end (when a deal looks like it is out of the question?)
TODAY: yesterday, the market pushed up close to my resistance, then trailed off on low volume, reflecting less activity on Veterans Day.
The market will open lower today as anxiety about the horrors of a plunge over the fiscal cliff mount in face of escalating coverage by the media and a host of pundits.
Good chance of the DJIA plunging 100 or more points today. Get ready for the news whipsaw, comments that a solution is imminent (market up), comments that a solution is doubtful (market down).
Upside is limited by uncertainty about the fiscal cliff, as well as renewed concern for Greece. Resistance starts at DJIA 12,849 (S&P 500: 1383).
Investor’s first read – an edge before the market opens
S&P 500: 1380.03
Nasdaq Comp.: 2904.25
Russell 2000: 793.71
(Tuesday, November 13, 2012 (9:17 a.m.)
Keep in mind, the November to May period is historically a time when institutions buy. Expect frequent forays into the market as money managers use weakness to pick up stocks. I see a buying juncture at lower prices sometime in late December, really too early to nail down more specifically.
The fiscal cliff should have been solved a year ago by the Super-Committee. President Obama and House Speaker Boehner were close to crafting a deal, but political ideologies stood in the way.
Now, it’s deal time, and Obama and Boehner are ready to bring their parties to the beginnings of a solution.
Beginnings, meaning enough of an agreement before year-end to delay the deadline until details are finalized in early 2013. If December 31 passes without a solution, I believe it would be intentional and accompanied immediately by a plan to adjust the Bush-era tax cuts and get certain members House off the hook from their pledge to Grover Norquist, not to raise any taxes. Norquist heads up Americans for Tax Reform. I see the framework of a deal decided on by the “lame duck” (outgoing) members of the House, with the final details worked out by the new membership.
FACEBOOK (FB – $20.07): Looks like a big buyer stepped in. This can be expected at prices below $20. The action suggests $18.85 may be the new support level. It attracted buyers in mid-October.
Will FB drop below $18.85 ?
The chart is telling me odds have improved it won’t. Overall market weakness could take it lower, along with a host of other stocks.
FB’s ability to move up is complicated by millions of shares coming on the market that could be sold , shares that were in “lock-up” from its IPO. 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 on May 21, I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, 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 of $16.88. On September 4, it hit $17.55, its low since its IPO at $38. I’ll continue technical coverage for a while to accommodate readers, but think my objective here has been accomplished.
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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.