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No Room for a Rally Failure Today

Investor’s first read      - Brooksie’s edge before the openMonday, April 16, 2012        9:08 a.m. ETDJIA: 12,849.59S&P 500:   1370.26Nasdaq Comp.: 3055.33Russell 2000: 

Investor’s first read      – Brooksie’s edge before the open

Monday, April 16, 2012        9:08 a.m. ET

DJIA: 12,849.59

S&P 500:   1370.26

Nasdaq Comp.: 3055.33

Russell 2000:  796.29

I noted Friday that if  buyers stepped in to catch the selling that showed up prior to the open, it would be welcome confirmation of the market’s bullishness.  If not, I wrote, the market needs to do more work on deciding where its comfort level is.

Buyers were unable to offset selling and the  market took a hit, suggesting more work may be  needed  before a bottom “is in.”


There is now resistance to the upside starting at  DJIA 12,920 and (S&P 500:  1376).That resistance  can be broken, with  some good economic news.  A host of earnings surprises could do it, along with some solid economic reports this week (see below). Technically, the market’s action today and tomorrow is important. A rally failure (market gives back its intraday gain) calls for  a test of last week’s lows (DJIA 12,690, S&P 500: 1357) and odds favor they would be broken. The rally at the open must attract strong following to avert that test.

Until more earnings are reported, the Street isn’t sure what to expect. Spain’s problems could dwarf Greece’s; hopefully European leaders are better prepared this time around to deal with it.

And the economy ?  Well by now the Street should simply accept what I have been saying ad nauseam, that after the worst recession, financial crisis/bear market in 80 years, an economic recovery will take its time to recover with numerous speed bumps along the way.

Retail sales for March, reported  at 8:30,  came in much higher than expected, triggering a rally in the index futures before the open, however the Empire State Manufacturing Index  for April was sharply lower.


With concern for health  the U.S. economic expansion mounting after a disappointing April 6 Employment Situation report, the Street will be looking for reassurance that the economy is still improving.  This week will shed light on that.


Retail Sales (8:30) rose 0.8% in March three times the economist’s 0.3% estimate following a strong 1.0% in February after a gain of 0.6% in January

Empire State Manufacturing Survey (8:30)  The pace of growth in the New York area’s manufacturing slowed in April to 6.6 from 20.2, following  a 5- month, 19,4 point run since November.

Business Inventories (10a.m.) Rose 0.7% in January, inventory-to-sales ratio remained at 1.27.

Housing Market Index (10a.m.) A survey by the NAHB which rates the economy and housing market conditions, including current home sales, new home sales, projected sales and traffic of prospective buyers.


Housing Starts (8:30) Dropped 1.1% in February after a 3.7% gain in January. Permits rose 5.1% after a 1.6% gain in January.

Industrial Production (9:15) Was flat in February due to a drop in mining. Manufacturing rose 0.3% after a jump of 1,1% in January.


Jobless Claims (8:30) Rose 13,000 in the April 7 week to 380,000 Four-week moving average was  up 4,250 to 368,5000.

Existing Home Sales (10 a.m.) Slipped 0.9%  in February to a 4.59 million rate.

Philly Fed Survey (10a.m.) measures general business conditions in the Philadelphia region. The index jumped sharply in March to 12.5 from 10.2.

Leading Indicators (10a.m.)  Surged 0.7% in February with the help of improving jobless claims. Also contributing were the interest rate spread (Fed Fds/10 yr treasury rate), stock prices and building permits.

George  Brooks


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.

Here are the weekly trading strategies employed by the Tradier investing community, with commentary by Todd Horowitz.