The S&P 500 is close to hitting a new all-time high. That will trigger yet another round of bold headlines in the news media. There is a chance the BIG money may use the excitement to do some selling, especially if stock prices jump sharply on the news. The S&P is a benchmark for institutional timers.
A 3% to 5% correction s overdue, but the rush to buy stocks is escalating. Granted, the market has had a great run in four years, since year-end alone, but where else can invest their money.
We are witnessing a mini-feeding frenzy, but this pales compared to what it can become,
At some point, the market averages will go into a sideways trading pattern, but individual situations will sizzle. Small-cap stocks will soar, micro-cap stocks will surge.
I think this is what awaits us before this bull market runs its coarse.
The DJIA has posted 10 straight gains, the longest streak since 1996. It hit an all-time intraday high eight days ago. It sells at 14.2 times earnings vs. a 10-year average of 15.8.
The S&P 500 has not yet hit a new all-time high yet, but is close. It’s October2007 bull market closing high was 1,565.15 (intraday high 1,576.09). It sells at 15.4 times earnings vs. a 10-year average of 16.6.
As the euro-area countries slip deeper into recession, its leaders have decided to place more emphasis on growth and reducing unemployment than on austerity. This is another positive for U.S. companies.
Investor’s first read – an edge before the open
DJIA: 14,539.13
S&P 500:1,554.51,563.232
Nasdaq Comp.: 3,245.113,258.92
Russell 2000: 943.90953.07
Friday, March 15, 2013 (9:14 a. m.)
QUADRUPLE WITHCHING Today:
This occurs four times a year when contracts for stock index futures, stock index options, stock options, and single stock futures expire, It happens on the third Friday of March, June, September, and December. Years ago, the squaring of positions accompanying this event caused huge swings in stock prices either way. In recent years, it has been less disruptive.
TODAY: Odds favor the S&P 500 will hit a new all-time high today, triggering emotional buying. Will the BIG money use this to sell ? While the bull is far from over, a consoliudation is about the last thing anyone expects.
BOND BUBBLE:
With money market, T-bill, and CD yields next to nothing, investors rushed to bond funds for a better return. That was a good move when bond prices were rising with interest rates declining. Bigger money sought “safety” in Treasuries with a mix of short- and long-term bonds.
I have been saying this for months, but it is worth saying it again, unless one plans to hold long-term bonds until maturity, there is risk of a sharp drop in their value when interest rates rise in face of global economic recovery. The drop can wipe out years of returns.
Apple (AAPL: $432.50) Yesterday’s price action was an improvement. A break above $435 improves AAPL’s technical pattern, a break above $440 even more. In pre-market trading it is already above $435. Yesterday it got a boost when BTIG research upgraded it to a buy from neutral, noting there are new products yet to be released and the expectation that the company will return to earnings growth in 2014.The bulls need more volume here to overcome the steady, but unhurried selling.
The risk of another leg down has been a possibility since early February, but the potential for an announcement about plans for its $137 billion in cash has triggered enough buying to prevent another plunge. At less than 10 times earnings, customer service second to none, and down 39% from its September $705 high, this industry leader should be attracting more buying. If institutions are going to see value here, they will all see it at the same time. That’s when it will finally turn up. I sense there is some serious money earmarked for AAPL, it is just waiting for a greener light on earnings growth going forward. It shouldn’t take much to trigger a stampede.
I am not long or short AAPL.
FACEBOOK (FB – $27.04) The selling and steepness of its decline here has accelerated, suggesting lower prices. While support at $26.88 held yesterday, FB needs a very big buyer to prevent a drop to the mid-20s. Resistance to rallies keeps notching down and is now $27.5.
I am not long or short Facebook.
ECONOMY:
This will be a heavy week for economic reports.
But the Street is heartened by favorable economic data on employment, personal income, consumer sentiment, auto sales construction spending, durable goods manufacturing, and housing.
I am going to list the economic reports below but will not include the numbers from the last report, since those numbers are often revised significantly and therefore are potentially misleading.
I strongly urge you to access the website: www.mam.econoday.com for detailed reports on this week’s calendar and an excellent recap (plus graphs) of last week’s reports. The site does a great job graphically illustrating key indicators.
FRIDAY:
Consumer Price Ix. (8:30)
Empire State Mfg. Svy.(8:30)
Industrial Production (9:15)
Consumer Sentiment (9:55)
* If I were to be restricted to get one market letter, and one only, it would be InvesTech. Its indicators and interpretation thereof are damn near flawless. www.investech.com (406) 862-7777
George Brooks
“Investor’s first read – an edge before the open”
[email protected]
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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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