Market in Limbo – Big Day for Facebook

Investor’s first read – Brooksie’s edge before the open
Thursday, August 16, 2012 9:17 a.m.
DJIA: 13,162.78
S&P 500: 1405.53
Nasdaq Comp.:3030.93
Russell 2000: 809.21
(y-a-a-a-w-n !) Remember the good old days with 200-point swings per day in the Dow ?
Weren’t yawning then.
Nevertheless, this inaction is typical of consolidation phases when the market is stuck in neutral, an unusual balance between bulls and bears waiting for a piece of news to jolt it out of its lethargy.
Jobless claims were up 2,000 for the week ended Aug 11, not a game changer.
While Housing Starts were down 1.1% in July, they were up 6.8% in June.
Dallas Fed president, Richard Fisher told CNBC yesterday that a recession is unlikely, but further stimulus by the Fed wouldn’t spur growth anyhow.
CONCLUSION: So the cheer leaders for Fed action now aren’t making much noise, but neither is the other side.
Again – recoveries from severe recessions take time, they can’t be rushed, neither can an extension of a bull market. The broad-based S&P 500 is up 111% from its March 6, 2009 intraday low. Not bad.
What is needed is the ability to reasonably estimate what our economy and global economies will be doing a year from now, well beyond the election, recessions in Europe and slowdowns in China and Japan, and “sequestration” here.
The stock market has already discounted survival, it must now put a price on the future. To me, that suggests a return to volatility.
A correction would find initial support at DJIA 13,050 (S&P 500: 1385).
Facebook ($21.20 ) FB has tested (but not penetrated) its low of $ 19. 83 three times in two weeks. To be meaningful, a “testing” process must involve moves in both directions. We had the second test last week followed by a bounce late in the week, and another test yesterday followed by a rebound.
The idea for non-chartists here I if a stock cannot break a support level, there must be some solid buyers holding the fort.
Its big challenge begins today when 271 million shares come out of IPO lock-up, some of which may hit the market.
To its credit, it did not sell off yesterday in expectation of this potential selling, but is weak in pre-market trading.
Over the next nine months, close to 1.91 billion shares will become eligible for sale vs. 421 million shares trading now.
What would be good for the stock would be if one of the major holders like
Microsoft (MSFT), which sees itself as a strategic partner as it jousts for position with Google (GOOG), bought more. That would be very positive.
If the market can absorb heavy selling in the next several days, FB should be able to mount a rally to $23 – $24, as shorts cover and traders enter for a hit ‘n run.
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 I felt at $34 it was very vulnerable in face of all the misunderstanding and hype.
ECONOMIC REPORTS: Big Week for economic reports.
TUESDAY:
NFIB Small Business Optimism Index (7:30) – Down 0.2 points in July to 91.2 in line with general economic weakness.
Producer Price Index (8:30) – Up 0.3% in July after a 0.1% rise in June and 0.1% increase in May. Prices at the wholesale level were up 0.5%, corn was up 35%.. Core, excluding food and fuel was ahead 0.4%. Year over year core was up 2.5%.
Retail Sales (8:30) – July retail sales were up 0.8% with all components contributing after softer than expected sales in June.
Business Inventories (10:00) – Q2 inventories rose 1.2% vs, a 1.6% rise in Sales in the quarter were unchanged bringing the Inventoy/sales ratio up to1.27.
WEDNESDAY:
Consumer Price Index (8:30) – Unchanged in July vs. no change in June. Ex food and energy, the CPI rose 0.1% following a 0.2% in June.
Empire State Mfg Survey (8:30) – declined 5.85 points in the August 12 reporting period vs. an increase of 7.39 points in the prior period.
Industrial Production (9:15) – Up 0.6% in July after an increase of 0.1% in June. Capacity Utilization improved to 7.9%
Housing Market Index (10:00) –Surged 6 points to 35, the biggest gain in 10 years. The index reflects the sentiments from a survey by the NAHB regarding the economy and housing market.
THURSDAY:
Jobless Claims (8:30) – Rose 2,000 in the August 4 week to 366,000 bringing the 4-week average to 363,750.
Housing Starts (8:30) – Declined1.1% in July vs. a gain of 6.8% in June. Permits were up 6.8% vs. a drop of 3.3% in June.
Philadelphia Fed Survey (10:00) – Improved slightly in July, though only a positive blip in a soft environment.
FRIDAY:
Consumer Sentiment (9:55) – Flat in July
Leading Indicators (10:00) – Down 0.3% in June after a rise of 0.4% in May. This is a composite index of 10 economic indicators.
RECENT POSTS:
July 12 DJIA 12,609 “June 4 Rebound “Must” Hold or Else !”
Vacation break
July 25 DJIA 12,617 “June 4 Lows at Risk”
July 26 DJIA 12,676 “Don’t Buy the Open”
July 27 DJIA 12,887 “Facebook Selling Climax Monday ?”
July 30 DJIA 13,075 “Market Betting the Fed Will Act”
July 31 DJIA 13,073 “Face-off: Negatives and Uncertainties vs. Positives”
Aug. 1 DJIA 13,008 “Fed Action Hoped For”
Aug 2 DJIA 12,976 “Recovery Sucking Wind, Not Tanking”
Aug 3 DJIA 12,976 “What This Market Needs”
Aug 6 DJIA 13,092 “NEXT ! Sequestration”
Aug 7 DJIA 13,117 “Is The Light Green Enough ?”
Aug 8 DJIA 13,168 “Facebook Testing Lows”
Aug 9 DJIA 13,175 “Alert: Congress Seeking Wiggle Room”
Aug 10 DJIA 13,165 “ Correction to Test BIG Money’s Interest”
Aug 13 DJIA 13,207 “Market Needs More Aggressive Buying to Move Higher”
Aug 14 DJIA 13,169 “Big Money Will Call the Shot”
Aug 15 DJIA 13,172 “Wall Street Quandry”
George Brooks
*Bloomberg .com
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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.