Markets Arrive at a Crossroad

George Brooks |

nyse, wall street, economy, stock marketInvestor’s first read      - Brooksie’s edge before the open

Thursday, April 26, 2012        9:10 a.m. ET

DJIA: 13,090.19

S&P 500:   1390.72

Nasdaq Comp.: 3029.63

Russell 2000:811.72

The market chipped away at a bearish “topping” pattern yesterday.  Prompted by  the morale booster  of a 50-point pop in Apple’s (AAPL) stock and upbeat comments by Fed chief Bernanke, the market managed a nifty gain, which it held throughout the day.

Volatility rules driven by uncertainty out of Europe and the direction of the U.S. economy. Politics will get downright ugly between now and November, but how much uglier can it get?

Treasury Secretary Timothy F. Geithner noted yesterday that  the U.S. faces a “fiscal cliff,” with the simultaneous expiration of tax  and spending cuts that only bipartisan cooperation  in Congress can solve.

Confidence in Europe’s economy is declining more than expected according to the index of executive and consumer sentiment for the 17-nation euro area which dropped to 92.8 in April from 94.5 in March.* Economists expected 94.2.

As expected, austerity measures by euro-area countries attempting to slash indebtedness, are adversely impacting economies which desperately need “growth” to pull them out of their mess.

None of this comes as a surprise to the Street, it was expected, but the reality is beginning to set in and that is unnerving.

So far, it hasn’t seriously impacted U.S. stock prices. Perhaps the Street believes European leaders can head off  a meltdown abroad  earlier and with more certainty this time around.  I would think so.

TODAY: Jobless Claims at minus 1,000 for the week ended April 21 didn’t help the bulls before the open this morning.  Existing Home Sales come at 10 o’clock.

Short-term downside risk is DJIA 12,965 (S&P 500: 1375). The overall pattern is neutral with a slight negative bias.  The  market needs a rise above DJIA 13,250 (S&P 500: 1,410) to  erase the “topping” pattern in effect now. A drop below DJIA12,810 (S&P 500: 1357) would  be ominous.

ECONOMIC REPORTS

Again, the flow of economic reports will be important this week because the Street is concerned that the economy is slowing.

TUESDAY

Case Shiller Home Price Ix (9:00) – a 20-city house price index indicated prices dropped at a slower rate in February, suggesting the market was stabilizing.  Home prices declined 3.5%  vs. a year ago.

New Home Sales (10 a.m.) At an annual rate of 328,000, March sales of new homes exceeded projections but declined 7.1% from a February’s upward revision of 353,000. A Bloomberg survey of 78 economists forecast an annual  rate of 319,000.

Consumer Confidence (10 a.m.) –  was unchanged in April

following a drop  to 70.2 in March from 71.6 in February.

FHFA House Price Ix (10 a.m.) – unchanged in January after a 0.1% increase in December.

WEDNESDAY

Durable Goods (8:30) – March orders were down 4.1% . The numbers were adversely impacted by declines in the aircraft industry, which  somewhat masked gains in other sectors of the economy. FOMC Meeting Announcement (12:30) -  is expected to leave policy rates unchanged, but the Street will be focused on comments by Fed officials after the meeting for any clues about a change in policy going forward.

THURSDAY

Jobless Claims (8:30) – declined 1,000 for the week ended April 21 vs, a drop of 2,000  in the  prior week. The four-week average is now 381,750.

Pending Home Sales (10 a.m.) – dropped 0.5% in February after a 2.0% rise in January.

FRIDAY

GDP (8:30) – Q4’s GDP’s last estimate was a plus 3%.  Q3 was 1.8%.

Employment Cost Ix (8:30) – a measure of the total employee compensation costs, including wages, salaries and benefits. It rose 0.4% in Q4 vs, a rise of 0.3% in Q3.

Consumer Sentiment (9:55) – The index slid to 75.7 in mid-April from 76.2 in March

George  Brooks

*Bloomberg News

**Stock Trader’s Almanac.  You should not be without this statistical  gem and reservoir of investing savvy. Got my first issue in 1968 and every one since.

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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.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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