The DJIA hit yet another bull market high yesterday with a gain of $2.77 for the day.
As the 4 p.m. closing bell approached, CNBC began a dramatic countdown – Will it, or won’t it close at the 6th straight bull market high ?
What does all this mean ?
Suddenly, the stock market has a noisy rooting section – the press, which was quick to emphasize the negatives as the DJIA climbed a 7,840-point wall of worry, creating enough fear to keep a lot of investors on the sidelines.
Now, it is orchestrating a rush to buy, and will continue to do so.
The S&P 500 has not yet hit a new intraday, bull market high, but will do so, in time. That event will be accompanied by yet more press headlines.
CONCLUSION: This is the kind of euphoria that drives bull markets to higher and higher levels, leading eventually to rank speculation, a time when it’s very hard NOT to be “all-in.”
With money markets yielding next to zilch, where else can a person put their money ?
When least expected, or in response to unexpected news, this market will undergo a 3% to 5% correction. From current levels, that would work out to a drop of 420 to 720 points on the DJIA. Unless triggered by unexpected bad news, I think such a drop would be preceded by some churning in the market averages as sellers meet buyers head-on.
You are now seeing the opposite of what you saw in the latter stages of the bear market in early 2009. Then it was selling driven by fear of the market going lower. Now it is buying driven by fear that the market will go higher without an investor participating.
Investor’s first read – an edge before the open
DJIA: 14,450.66
S&P 500: 1552.48
Nasdaq Comp.: 3,242.32
Russell 2000: 940.26
Wednesday, March 13, 2013 (9.06 a.m.)
APPLE (AAPL: $428.43) All the Smartphone stocks got hit yesterday, AAPL no exception. It is currently a half a point below my “must hold” level. I can cut it a little slack there, but its daily performance was cause for concern as it closed at its low for the day, off $9.44. The risk here has been for a drop to $400 and that’s been a risk since late January. But the potential for an announcement about plans for its $137 billion in cash has triggered enough buying to prevent another plunge. Yesterday, I said the $429 was a “must” hold level, since a drop below that leaves $420 as the only potential support before it drops to $400.
I am not long or short AAPL.
FACEBOOK (FB – $27.83) FB has been running into sellers a bit above the $28 level raising the likelihood of a test of February $28 low of $26.34. FB should hold Above $26.88.
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.
WEDNESDAY:
Retail Sales (8:30)
Import/Export Prices (8:30)
Business Inventories (10:00)
THURSDAY:
Jobless Claims (8:30)
Producer Price Ix.(8:30)
Current Account (8:30)
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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