Wednesday, February 15, 2012 9:23 a.m. ET
DJIA: 12,878.28 S&P 500: 1350.50
Yesterday was what I refer to as “market churn,” down then back up.” If you look at a short-term (daily) chart of the market averages (bigcharts.com - 10 weeks) you’ll see an interesting “yo-yo” pattern where the market averages shoot up at the open, then down at the close, or down at the open then up at the close, almost as if it were a penny stock and being manipulated.
Greece: While remote, a Greek default, or version thereof, is still possible. Just acknowledge that you may wake up one day to a nasty situation. It may be possible that default is eventually going to happen, so why throw good money after bad. I have noted here on many occasions that this is the year I expect the European sovereign debt issue to move from Page One to a page deeper in the news.
Common sense tells me that default by Greece or others will be headed off, i.e. the cost of rescue being far less than the cost of default. But more than two years have passed, giving the stronger Euro-area countries time to develop roadblocks to prevent a default(s) from causing a widespread meltdown. Most likely “snags” to Greek rescue # 2 are just arm twisting at the last minute by the Euros.
Just don’t dismiss the possibility of something ugly whacking the market unexpectedly, which as I see it now would hammer portfolio values temporarily, but create a great buying opportunity.
CONCLUSION: A market churn can be expected to continue, with selected stocks running as if nothing is of concern. This is a stock pickers’ market. A month ago, rock solid (but boring) stocks like Microsoft (MSFT), GE (GE), Oracle (ORCL), Cisco (CSCO), and EMC (EMC)* could be bought at attractive prices to produce nice gains. They were thought of as “ho-hummers,” but the big names do offer opportunities, it takes good timing though to capitalize. In the interim, the action has spread to others, suggesting the institutions are getting more aggressive, but not swinging for the fences – that WILL happen though.
NEWS just out: The Empire State Manufacturing Survey shows a sharp improvement in regional business conditions, an affirmation that the economic recovery is gaining traction.
TODAY: A see-saw market is likely with an attempt to break out above DJIA 12, 930 failing, and a test of support at12,800 likely. Traders’ may want to watch for the “test.” of support . A breakout depends on the euro, which was up earlier but is now down. Normally, I don’t key on the euro except it should not have swung from plus to minus this quickly the hour before the U.S. stock market opens. A new uncertainty (not uncommon) has risen which may mean little, it just feels like a kick in the shins today.
This will be a busy week for economic reports, what’s important is that there is no serious evidence of slippage in the U.S. economic recovery which is one of the key reasons for the stock market’s recent strength.
- Retail Sales (8:30 a.m.): Up 0.1 pct in Dec, 0.4 pct in November and 0.7 pct in October, however latest strength came from autos, up 1.5 pct.
- Export/Import Prices (8:30 a.m.): Trending down in last 5 mos.
- Business Inventories (10 a.m.): Inventory/sales ratio unchanged last 5 mos.
- MBA Purchase Applications (7 a.m.): Measures mortgage applications at lenders
- Empire State Manufacturing Survey (8:30 a.m.): Rose sharply in December and January.
- Industrial Production (9:15 a.m.):
- Housing Starts (8:30 a.m.): Dropped 4.1 in December after a 9.1 pct rise in November.
- Jobless Claims (8:30 a.m.): Dropped another 15,000 for week ended February 4, bringing the 4-week average down to366,250.
- Producer Price Index (8:30 a.m.): Dropped slightly in December after November bounce.
- Philly Fed Survey (10 a.m.): Notched higher in January, though new orders were off
- Consumer Price Index (8:30 a.m.): Unchanged in December for second month in a row reflecting lower energy costs.
- Leading Indicators (10 a.m.): positive
Jan 23 DJIA: 12,720 "Europeans Seeking Long-Term Economic Cure"
Jan 25 DJIA: 12,675 "Consolidation, Correction Likely though US Stocks Hold Strong Against EU Turmoil"
Jan. 26 DJIA: 12,756 "Fed Would Raise Interest Rates If Inflation Picks Up"
Jan. 27 DJIA: 12,734 "Warning! Tradable Market Action Lies in Waiting"
Jan. 30 DJIA: 12,660 "“HUGE” Week for Economic Indicators"
Jan. 31 DJIA: 12,653 "All That Is Needed Is a Spark"
Feb. 1 DJIA: 12,632 "Week’s Economic Reports Could Be The Springboard"
Feb. 3 DJIA: 12,862 "Investors Beating the Bullish Tune"
Feb. 6 DJIA: 12,845 "Follow the Money as It Exits Safe Havens"
Feb. 7 DJIA: 12,878 "Market Held Up By Sneaky Buying"
Feb. 8 DJIA: 12,883 "Is It Safe For Bulls to Come Out and Play?"
Feb. 9 DJIA: 12,890 "BIG Money Buying the Future"
Feb. 10 DJIA: 12,801 "Can a Greek Deal Be Accomplished Over the Weekend?"
Feb. 13 DJIA: 12,874 "Easy Does It! Some Selling Into Good News Expected"
Feb. 14 DJIA: 12,878 "Investors Should Expect “Market Churn”"
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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