Market Projects No Stimulus Announcement on Friday

George Brooks |

NYSE Wall StreetInvestor’s first read - Brooksie’s edge before the open Tuesday, August 28, 2012 9:12 a.m.
DJIA: 13,124.67
S&P 500: 1410.44
Nasdaq Comp.: 3073.19
Russell 2000: 820.40

Economic growth in Europe, China and Japan is sagging, only the United States is in growth mode, however marginal. The Street is anxiously awaiting Fed Chairman Ben Bernanke’s speech Friday, August 31, for a hint about a new round of economic stimulus.

The market is acting like they won’t get it Friday, but will have to wait for the FOMC meeting September 12 – 13, which will be accompanied by economic projections and a Bernanke press conference.

Stepping back for a look at the big picture, it is bullish that the world’s economies and entire fiscal/financial structure survived the Great Recession. A stock market that has risen 112% since early March 2009 attests to that.

What is happening now is every bit as critical as what happened in 2008 and early 2009 when everything was on the verge of a meltdown. In coming months we will find out whether all the efforts by governments, institutions and individuals were enough to avert a disaster or is simply a way station en route to a crash.

Based on my experience and the info I access, I think they pulled it off. If so, Europe deserves a lot of credit, though their leaders were painfully slow to address issues head-on.

However, we are in unchartered waters. For one, so much of our economies and finances are connected internationally. For another, a “casino” mentality calls so many shots today vs. 20 years ago. Computers make so many decisions, but are only as prescient and credible as the minds that program them. One flaw or oversight can devastate a company and those connected with it.

If just a portion of the maze of derivatives ever blows up, the losses would be unfathomable. Recently, a JP Morgan hedging strategy went bad costing it an estimated $2.3 bn loss. Risk management?

How big is this market? My initial probe estimates it at close to $800 trillion, but don’t bet on that. The fact of the matter here is, you simply aren’t going to put Humpty Dumpty back together again if he falls off that wall.

Don’t stand between any of these guys and a fee or commission! There is nothing that can be done to guarantee against a blow up.

CONCLUSION: Had to get that off my mind, because it’s not given much thought and it is the “not given much thought” stuff that can suddenly do the most damage.

Hope for Fed action has wrestled center stage away form Greece/Europe, the November elections and the fiscal cliff.

Amazing! No angst about the fiscal cliff ? Perhaps it’s too complicated to tear voters away from the opening of the college football season, back to school, their addictive “Tablets,” and other less important distractions.

I don’t see many bumper stickers or hear any election banter. What’s the problem? People too intimidated by extremists politics to speak out?
The new direction of the country – Scary!

TODAY: The DJIA must break up through 13,180 to reverse a negative trend. It’s only hope is ugly reports on home prices, Consumer Confidence and the Richmond Fed Index (see below). “Ugly” ensures Fed action in several weeks!

Odds favor a drop to DJIA 13,040 (S&P 500: 1402) with a shot at DJIA 12,945 (S&P 500: 1365) by late Friday.

FACEBOOK (FB: $19.15):

BIG buyer needed – NOW, or FB will plunge again as hopes that last week’s $18.75 low will be :toast.”

Last week was the week I said FB would hit its low, with a target of $16.88. While it posted an all-time low of $18.75, the stock is now locked in an unimpressive basing pattern.

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. At some point I will drop coverage. I would like to see readers through the full cycle, from the $34 where I picked it up as “going lower” down to a bottom.

ECONOMIC REPORTS: Big week.

MONDAY:
Dallas Fed Mfg Survey (10:30): Declined to 6.4 in August from 12.0 in July, reflecting softer growth. New orders eased to 0.3 from 1.4.

TUESDAY:
S&PCase Shiller Home Price Ix (9:00): The 20-city home price index gained 0.9% in May following a 0.7% gain in April and 0.8% gain in March.

Consumer Confidence Index(10:00): Rose 3.2 points in July to 65.9 (June revised upward 7 tenths to 62.7.

Richmond Fed Mfg Ix (10:00): Fell in July to minus 17.0 from a minus 1.0 in June. New Orders plunged to minus 25 from minus 7.

WEDNESDAY:

GDP (8:30):Q2 growth slowed to a 1.5% annual rate from Q1’s 2.0%.

Pending Home Sales (10:00): Fell 1.4% in June after a 5.4% gain in May.

THURSDAY:

Jobless Claims (8:30): Were up 4,000 to 372,000. The 4-week average is up slightly to 368,000 but still 8,000 below the mid-July level.

Personal Income Outlays (8:30):

Kansas City Fed Mfg Ix (11:00): Rose to plus 5 in July from plus 3 in June. New orders rose to a minus 4 from a minus 7.

FRIDAY

Chicago PMI(9:45):Up 0.8 to 53.7 in July. New Orders rose 1.0 points to 52.9.

Consumer Sentiment (9:55): Gained in mid-August to 87.6 from July’s 82.7

Factory Orders (10:00): Declined 0.5% in June, including a 2.9% drop in Petroleum and coal.

George Brooks
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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.

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