Market Stall Masks Opportunities

George Brooks  |

Investor's first read   - Brooksie's edge before the open

Thursday, February 23, 2012      9:09 a.m. ET

DJIA: 12,938.67      S&P 500: 1357.66

Two things are clear. One, the economic recovery intact since mid 2009 has been slow because the Great Recession/Bear Market preceding it was the worst since the 1930s. The Street “wishes” the recovery were more robust, but reality is it can’t be for obvious reasons; it takes time to recover from such a severe  recession.

Two, the European Union [EU] of 17 countries is still in survival mode, hobbled by a handful of countries that are overburdened with sovereign debt and plagued by years of recession that  further compound their ability to avoid default.

Now that Greece is off Page One as a candidate for default, Spain and Portugal, even Italy will move to center stage for worriers. The bears  will begin their campaign  of  doom in coming months.

Some of  Europe has been in a recession for years, some of it on the threshold.

IF these two negatives didn’t exist, I believe the DJIA would be 2,000 to 3,000 points higher.

Since its bear market bottom in early March 2009, the broad-based S&P 500 has rebounded 104%, the Russell 2000 index of smaller companies 139%.

I think a lot of the appreciation in the market averages has taken place for the time being, but there will be great  opportunities in selected issues as investors take profits in stocks that have had a big run and invest in newly emerging issues (rotation of strength).

With help from the sale of distressed properties, Existing Home sales rose 4.3% in January. Single family homes accounted for 3.8% of the growth, multi-family homes 8.3%.  The median price of an existing house is now 154,700, down 11% from two years ago. I believe this sector will become an important contributor to the economic recovery going forward and a source of employment.

CAUTION: I think odds favor a 5% t 7% correction between now and early April, followed by a sharp rebound (buying opportunity ).  I don’t see it yet. It will start as a normal technical correction then be extended by a “news” item.

ECONOMIC NEWS: A light week for economic reports.


  • ICSC Goldman Store Sales (7:45 a.m.) a sampling of major retail sales (10% of total )
  • Existing Home Sales (10 a.m.) – December was up 5 pct. For third straight month which drew down the supply on the market to 6.2 million the lowest since 2006.


  • Jobless Claims (8:30 a.m.) – down 13,000 for week ended Feb.11 to 398,000, the 10th time in last 11 periods. Continuing claims were down 100,000 for week ended Feb. 4.
  • FHFA House Price Index – was up 1.0 pct. In Nov. after a drop of 0.7 pct. In Oct. Eight of the 9 census divisions were up.


  • Consumer Sentiment (9:55 a.m.) – early Feb. reading was down 2.5 pct.
  • New Home Sales (10 a.m.) – short of expectation in Dec. With a drop of 2.2 pct. , but follows three monthly increases of  Nov. 4 pct,  Oct. 1.7 pct., Sept. 2.3 pct.

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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”"
Feb. 15   DJIA: 12,780  "Market Churn to Include Brief Correction"
Feb. 16   DJIA: 12,904  "Another Snag in Greek Bailout + Long Weekend = Extended Correction"
Feb. 17   DJIA: 12,949  "Investors Establish Bullish Turf"
Feb. 21   DJIA: 12,965  "The Market’s Stall is Deceptive While Selected Issuers Could Hum"
Feb. 22   DJIA: 12,938  "Rotation of Strength: Continuing Opportunities as Market Averages Remain Sluggish"

George  Brooks


**National Journal


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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