Investor’s first read - Brooksie’s edge before the open
Tuesday, March 20, 2012 9:02 a.m. ET
DJIA: 13,239.13 S&P 500: 1409.75
What no crisis?
I scanned the international and U.S. news for something that could bring investors to their knees, and came up with zip.
Kidding aside, the stock market doesn’t have to have bad news to decline. Technical pullbacks occur without a trigger when profit-takers outrun buyer’s willingness to pay higher prices.
Then too, the stock market has a devilishly annoying way of anticipating a negative not yet spotted by the Street and declining ahead of the news.
For now Greece, et al, are not alarming headline news, the U.S. economy is not faltering, Iran’s leaders are not rattling cages, so why is the stock market opening lower today?
I think it’s part technical and part in anticipation of the ugliness that is about to be launched as both parties go into attack mode for the November elections.
Blood will flow on Capital Hill when the Republicans introduce their version of the 2013 Budget. This will mark the beginning of enough nasty discourse in Congress to remind investors stability here at home is anything but ensured.
With these representatives of America’s best interests lobbing lies and half truths back and forth, the bottom line will be “uncertainty,” ergo an investment environment that is not conducive to a runaway stock market.
This stands to coincide with THE END OF the Best Six Months”* of the year for owning stocks (Nov. 1 to May 1).
If you wish to recall, the stock market had a big “Best Six Months” run between Sept. 2010 and May 2011 (+14%) only to tank 20% between May and August as Congress pushed the country to the edge of default.
This year’s “Best Six Months” run has logged in a gain of 31% so far with six weeks to go until May 1.
TODAY: A weak open today may not signal anything but a minor correction that yields to a rebound in several days.
What’s important now is to acknowledge that news headlines will feature outright war between Republicans and Democrats as they joust for the upper hand in the November elections.
The BIG money may ignore them and buy aggressively if it sees the economy accelerating well into next year. Money flowing out of safe havens and into the stock market may be enough to overpower the negatives of Congressional and presidential candidate combat.
One result of all this stands to be “VOLATILITY.”
March’s NAHB/Wells Fargo (WFC) Housing Market Index (HMI) held its ground at the highest level in four years after five consecutive gains. “Builder confidence is now twice as strong as it was six months ago,” says NAHB chief economist David Crowe, adding there are still obstacles to a recovery including tight builder and buyer credit and the amount of distressed properties remaining on the market.
February Housing Starts were reported this morning. They came in close to projected levels at 698,000. Permits, a leading indicator for starts, were up 5.1% vs, a rise of 1.6% in January.
- Housing Market Index (10 a.m.): February’s index jumped 4 points to 29, the second straight 4-poing jump and 5th increase in a row. The Index is a weighted average of separate diffusion indexes covering new home sales, sales expected within 6 months, and buyer traffic.
- Housing Starts (8:30 a.m.) - rebounded 1.5% in January following a 1.9% drop in December Multifamily homes led the increase.
- Existing Home Sales (10 a.m.) –Rose 4.3% in January to a 4.57 annual rate reaching a 20-month high.
- Jobless Claims ( 8:30) –Decline for the week ending March 10. The 4-week average remains at 355,750.
- FHFA House Price Index (10 a.m.) – improved slightly in December with a 0.7 increase, the same as in November. Versus a year ago, the Index is down 2.5%
- Leading Indicators (10: a.m.) –January’s index was up a strong 0.4%
- New Home Sales (10 .a.m.) – declined 0.9% in January after a sharp increase in December. The median house price edged up to $217,100 in January.
Feb. 27 DJIA: 12,981 "Stock Prices: “May the Force Be With You”"
Feb. 28 DJIA: 13,005 "Big Test for Bulls Today"
Feb. 29 DJIA: 12,952 "Opportunities Exist Even in a Lethargic Market"
March 1 DJIA: 12,980 "Bull Market Intact – But Correction Likely in Coming Weeks"
March 2 DJIA: 12,977 "Selective Opportunities – Don’t Get Careless"
March 5 DJIA: 12,962 "Up or Down? Week’s Economic Reports Hold Key"
March 6 DJIA: 12,759 "Technical Correction Underway For Wall Street"
March 7 DJIA: 12,837 "Not Yet! Market Will Probe for a Comfort Level"
March 8 DJIA: 12,907 "Uneasy Market Anticipates Peaking Gas Prices"
March 9 DJIA: 12,922 "Easy Does It! Market is Selective Buying Only"
March 12 DJIA: 12,959 "Bulls Hanging Tough Against Correction"
March 13 DJIA: 13,177 "Threshold of a Big Market Move?"
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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