The big question is, has the market action this week caused bulls to back off ?
Sharp plunges Monday and yesterday may be enough to interrupt the persistent flow of buying, that has characterized the market’s behavior so far this year.
There has been profit taking throughout the advance that started in early January, but it has had little impact on prices, since buyers were always there to pick up stocks under selling pressure.
If that buying were to ease if only for a week or two, the market would take its first meaningful hit of 2013.
Q1 earnings are starting to pick up a head of steam with 29 S&P 500 companies reporting today. So far, 70% have beaten earnings projections, but only 51% have beaten sales projections – hmmm.
We are fast closing in on the end of the Best Six Months for Owning Stocks,* officially ranging from November 1 to May 1, but often starting earlier and extending longer as the Street jumps the gun on a strong tendency for stocks to perform better during this six month period, than between May 1 and November 1.
This does not mean that the entire period between May and November is a bummer throughout the entire six months, just that an ugly correction is likely to occur and odds strongly suggest it will start in May.
Last year, the S&P 500 took a 9.0% hit in the 22 days between May 1 and June 1 prior to a 14.6% rebound into mid-September, a discredit to the bromide, “Sell in May and Go Away.”
Bottom line: be extra careful about buying over the next 30 days. Don’t chase sharply rising stocks.
A break above near-term resistance at DJIA 14,645 (S&P 500: 1,555) would be good for a move to DJIA 14,669 (S&P 500: 1,557), but there is overhead supply in those areas now that will need strong buying to break through.
Minor support is DJIA 14,560 (S&P 500: 1,546). More important support lies close to DJIA 14,496 and S&P 500: 1,540.
Investor’s first read – an edge before the open
S&P 500: 1,552.01
Nasdaq Comp.: 3,304.67
Russell 2000: 907.69
Thursday, April 18, 2013 (9:17a. m.)
SEQUESTER: Stay tuned, it may become a factor.
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: $402.80)
Yesterday, I explained that if Tuesday’s drop to $419 held, it would comprise a “triple bottom, the first two coming on March 4 and April 5. I further explained that triple bottoms do not have a good record for holding, the implication here being that a break below $419 would lead to a plunge below $400. AAPL hit a low of $398, yesterday, my initial target if it broke through support in the $419 – $422 area. It “gapped” 6 points at the open yesterday and must now find a new comfort level. Resistance in $413. While I picked $398 as a low for AAPL months ago should $419 fail to hold, I think it is going to take a move down to $367 to clear the air.
I am not long or short AAPL.
FACEBOOK (FB – $26.62)
FB touched support at $26.40 yesterday, its third straight daily low at that level. Its pattern is still neutral but its support at that level is suspect if the overall market plunges further in which case the next support level is $25.40.
Between Aug. and Dec. last year, a trading range between$18 and $24 developed. That should provide support for FB and a buying opportunity. That’s where a three month tug of war took place between the believers and non-believers.
I am not long or short Facebook.
This will be a light week for economic reports.
But the Street is heartened by favorable economic data on employment, personal income, consumer sentiment, auto sales construction spending, durable goods manufacturing, and housing.
I am going to list the economic reports below but will not include the numbers from the last report, since those numbers are often revised significantly and therefore are potentially misleading.
I strongly urge you to access the website: www.mam.econoday.com for detailed reports on this week’s calendar and an excellent recap (plus graphs) of last
week’s reports. The site does a great job graphically illustrating key indicators.
Jobless Claims (8:30):
Bloomberg Consumer Comfort Ix>(9:45):
Philadelphia Fed. Svy(10:00)
Leading Indicators (10:00):
*Stock Trader’s Almanac: Just one of an endless list of seasonalities and market patterns published – an invaluable guide for active and casual investors – loaded !
“Investor’s first read – an edge before the open”
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.