Investor’s first read – Brooksie’s edge before the open
Thursday, August 30, 2012 9:15 a.m.
DJIA: 13,107.48
S&P 500: 1410.49
Nasdaq Comp.: 3081.19
Russell 2000: 817.79
While European Leaders are committed to preserving the euro, it’s not a done deal yet, as economies in Europe and Asia edge closer to recession complicating country’s need to balance expenses with revenues.
Obviously, this is now having an impact on the U.S. economy and that will continue for many months.
The second estimate for Q2 GDP showed an improved annual growth rate, as it gained 1.7% vs. a 1.5% growth rate in the first GDP estimate.
Pending Home Sales jumped 2.4% in July beating an estimate by economists for a 1% gain. Sales were ahead 15% vs. a year ago. June’s year over year gain in was 8.4%.
Jobless Claims for the week ending Aug. 24 were up 4,000 to 372,000, bringing the 4-weel average up to 368,000.
What does this mean insofar as the Fed is concerned ? Isn’t the Street hoping for ugly numbers to ensure Fed action ?
It’ll take more than two reports to convince the Fed this struggling economy doesn’t need help. We get some more key reports Friday (see below), but the Fed sits in the catbird’s seat, my guess is they know what they already are going to do next month when the FOMC meets on Sept. 12-13.
In light of what is happening abroad and here, I expect the Fed to announce the first of several efforts to boost the economy.
TODAY: Both the DJIA and S&P 500 were unable to surpass my resistance levels at DJIA 13,150 and S&P 500: 1413 yesterday suggesting it will take some good news to break out to higher levels. Presently support shows up at 13,080 (S&P 500: 1407). Breaking that, DJIA 12,945 (S&P 500: 1395) becomes support.
Note: support levels are no more than levels where buyers are likely to enter in great enough size to absorb selling and turn a stock or the market back up. If conditions change before that level is reached the stock or market can reverse, or go lower. These levels are arbitrary but followed by others and often programmed into computers to trigger a response..
FACEBOOK (FB 19.10 ):
No change from yesterday – a BIG buyer needed – NOW, or FB will plunge again to new lows.
Last week was the week I said FB would hit its low, with a target of $16.88. While it posted an all-time low of $18.75, the stock is now locked in an unimpressive basing pattern.
Yesterday’s weak performance increases the odds of a test of the low at $18.75. It can do that without meaningful news or big buyers.
The big question here is how does FB make money ? If I had that answer I would be either holding a bundle of shares or selling.
What is troubling here is no one else seems to have the answer, and therein lies the grave injustice of taking it public at $38 a share. Shame !
That doesn’t mean someone won’t rush forward with an answer. FB has some 900 million users worldwide. This is not a great idea with the need to build a base of subscribers, it has that. The company needs someone who knows how to utilize its assets, subs and cash.
There is some talk of a subscription fee, or 30-second commercial when a user logs in. Lot’s of luck on that !
At some juncture FB will hit bottom. I think that will happen soon and it should be accompanied by heavy volume with a sharp rebound that takes out all sellers under $18 – $20.
I don’t own, nor have I ever owned FB. Generally, I don’t recommend or comment on individual stocks. I started covering FB technically after its IPO because I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. At some point, I will drop coverage. I would like to see readers through the full cycle, from the $34 where I picked it up as “going lower” down to a bottom.
ECONOMIC REPORTS: Big week.
MONDAY:
Dallas Fed Mfg Survey (10:30): Declined to 6.4 in August from 12.0 in July, reflecting softer growth. New orders eased to 0.3 from 1.4.
TUESDAY:
S&PCase Shiller Home Price Ix (9:00): The 20-city home price index gained 0.5% in May following a 0.7% gain in April and 0.8% gain in March.
Consumer Confidence Index(10:00): Declined to 60.6 in August from 65.4 in July.
Richmond Fed Mfg Ix (10:00): Improved to minus 9 in August from minus 17 in July.
WEDNESDAY:
GDP (8:30): In its second revision, Q2 grew at a 1.7% annual rate from Q1’s 2.0%. The 1st revision was a growth rate of 1.5%.
Pending Home Sales (10:00): Rose 2.4% in July beating estimates for a gain of only 1%.
THURSDAY:
Jobless Claims (8:30): Were up 4,000 to 374,000. The 4-week average was up 3,750 to 368,000
Personal Income Outlays (8:30): Personal Income in July increased 0.3% to $42.3 billion, Personal outlays were up 0.4% to $46.0 billion.
Kansas City Fed Mfg Ix (11:00): Rose to plus 5 in July from plus 3 in June. New orders rose to a minus 4 from a minus 7.
FRIDAY
Chicago PMI(9:45):Up 0.8 to 53.7 in July. New Orders rose 1.0 points to 52.9.
Consumer Sentiment (9:55): Gained in mid-August to 87.6 from July’s 82.7
Factory Orders (10:00): Declined 0.5% in June, including a 2.9% drop in Petroleum and coal.
RECENT POSTS:
Aug 2 DJIA 12,976 “Recovery Sucking Wind, Not Tanking”
Aug 3 DJIA 12,976 “What This Market Needs”
Aug 6 DJIA 13,092 “NEXT ! Sequestration”
Aug 7 DJIA 13,117 “Is The Light Green Enough ?”
Aug 8 DJIA 13,168 “Facebook Testing Lows”
Aug 9 DJIA 13,175 “Alert: Congress Seeking Wiggle Room”
Aug 10 DJIA 13,165 “ Correction to Test BIG Money’s Interest”
Aug 13 DJIA 13,207 “Market Needs More Aggressive Buying to Move Higher”
Aug 14 DJIA 13,169 “Big Money Will Call the Shot”
Aug 15 DJIA 13,172 “Wall Street Quandry”
Aug 16 DJIA 13,162 “Market in Limbo – Big Day for Facebook”
Aug 17 DJIA 13, 250 “Facebook Bottom Imminent – $16.88 Worst Case ?”
Aug 20 DJIA 13,275 “Odds Favor Facebook Bottom This Week -$16.88
As BIG Money Steps In ?”
Aug 21 DJIA 13,271 “Facebook: Selling Climax to New Low, or Will BIG Money
Step In ?
Aug 22 DJIA 13,203 “Facebook Probing for a Bottom?
Aug 23 DJIA 13,172 “Correction to Follow Stimulus Announcement ?”
Aug 24 DJIA 13,057 “Facebook-Needs Big Buyer Pronto, or New Lows”
Aug 27 DJIA 13,157 “Week’s Economic Reports May Prompt Fed Action:
Aug 28 DJIA 13,124 “No Stimulus Announcement Friday”
Aug 29 DJIA 13,102 “Uncertainty for Investors Accelerates”
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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