News Whipsaw Calling the Shots - Careful!

George Brooks |

Wall Street EarningsInvestor’s first read   - Brooksie’s edge before the open

Monday, June 11, 2012        9:08 a.m. ET

DJIA:  12,534.20

S&P 500:  1325.66

Nasdaq Comp.: 2858.42

Russell 2000:  769.19

Historically, presidential election years are gainers, but not nearly as dynamic as pre-presidential election years. Last year, a pre-presidential election year, was flat, so why should this year follow the historical norm  and be up ?

Well it could be, much depends on Q4. Currently, the broad-based S&P 500 is ahead 5.3% this year, but odds favor a very uncertain news environment as the  media hypes the horrors of our nation plunging over the “fiscal cliff,” and investors wrestle with Europe’s woes and the prospect of a global economic slowdown along with an ugly presidential election campaign.

None of these will be solved near-term.

The “news whipsaw” will one day convince investors one of these issues are about to be resolved or reduced in their adverse impact only convince investors in a day or two that they won’t.

This spells irrational volatility.

For how long ?

September/October.

I think the BIG money will get the inside on Europe and  global economies and buy ahead of the crowd, or sell/stay away. The fiscal cliff will be dealt with after the election and before January 1.

TODAY:  At 4:15 this a.m., European markets were up sharply in response to Spain’s request  for a 100 billion-euro bailout of its banks. The futures suggested a big open for the U.S. stock market, some plus 120 points for the DJIA. At  8:45 a.m., the futures suggested a modest open up 45 Dow points.

What happened  ?

Not sure yet, but my read is the announcement that Spain is “asking” for a bailout was interpreted as if it already has one, ergo no reason to worry about Spain anymore. I don’t buy that.

Then too, there still remains the uncertainty of the outcome of Greece’s election on Sunday the 17th – a “go” or “no-go” for Greece’s staying with the euro.

Common sense would say, the European leaders will agree on a plan to save the euro, the cost of failure is huge. In the interim, they have to prevent massive dumping of Spanish bonds and a run on certain euro-area banks.

That means reassuring statements from time to time to head off  panic.

This stands to be one of those markets where it is hazardous to buy after several up days and psychologically difficult to buy after several down days when prices are lower.

Odds favor wide swings in stock  prices, ranging between DJIA 11,860 on the downside and 12,695 on the upside. That would be 1245 and  1336 for the S&P 500.

These are preliminary numbers. The market is still probing for a comfort level, a lot of issues are still up in the air.

ECONOMIC REPORTS:  With economies in Asia and Europe sagging, the Street is watching to see which direction the U.S. economy will take.

Will this trigger QE3 by the Fed. ?

TUESDAY:

NFIB Small Business Optimism Index (7:30): Jumped in April due to job creation plans and capital spending.

Import and Export Prices (8:30): Import prices dropped in April 0.5% after a 1.5% jump in March. Oil-based products were a contributor.

Treasury Budget (2:00p.m.): April posted a $59.1 billion surplus, the first in 3 ½ years bringing the year-to-date deficit down to $719.9 billion well below the year ago deficit of $869.8 billion.

WEDNESDAY

Produces Price Index (8:30): April prices fell 0.2% after a flat March. Core prices rose 0.2% after a 0.7% rise in March.

Retail Sales 8:30): April sales rose 0.1% after a 0.7% rise in March.

Business Inventories (10:00): Inventories rose 0.3% in March as sales rose 0.6%. The inventory-to-sales ratio stands at 1.27

THURSDAY

Jobless Claims (8:30): Claims fell 12,000 to 377,000 for the June 9 week.. The 4-week average in 377,750

Consumer Price Index (8:30): Unchanged in April after a 0.3% rise in March. Excluding food and energy, it was up 0.2% vs. the same in March.

FRIDAY

Empire State Manufacturing Index (8:30): The Index rose 10.53 points to 17.09 in May. New Orders were up to 8.32 from 6.48 after a strong increase in shipments.

Industrial Production (9:15):Jumped 1.1% after a 0.6% drop in March.

Consumer Sentiment (9:55): Index was up 3 points in May to 79.3 from April.

*Bloomberg.com

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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Symbol Name Price Change % Volume
CIX:CA CI Financial Corp. 27.00 0.18 0.67 585,246

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