Rally Possible: Stock Market Still Needs Time Before Big Turn

George Brooks  |

In the process of finding a level that discounts known and potential negatives in the stock market, there will be rallies.

Some market movements will look like the big turn only to fail and yield to another decline.

Yesterday, I said I expected more selling, but that there was the chance of a short-term, technical rally starting today after a drop to 11,930 on the Dow Jones Industrial Average (S&P 500: 1270).

That’s still in the cards, but I would be more confident if we get a plunge today, (after a positive open), and selling during the first two hours of trading tomorrow.

OK for the more astute trader, tricky otherwise.

Brooksie’s Daily Stock Market blog: An edge before the open.

Thursday, June 9, 2011 9:16 am EDT

DJIA: 12,048.94
S&P 500: 1279.56
Nasdaq Comp.: 2675.38
Russell 2000: 788.04

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The Fed’s Beige Book report at 2 o’clock yesterday did nothing to turn the market, even though its general thrust wasn’t of a crashing economy. The report, published eight times a year, covers economic conditions in each of the 12 Federal Reserve Banking districts.

The Fed says the economy expanded at a “steady pace” in most parts of the country, while slowing in others. Fed chair, Ben Bernanke, expects the economy to regain its expansion in the second half.

Jobless Claims for the June 4 week were up 1,000. It’s fine they weren’t up more, but what’s needed now is for these numbers to start dropping.

Until the economy really hums, or until CEOs envision it humming in the near future, I can’t see the employment or unemployment picture improving meaningfully.

That does not mean companies can’t make money, many are now.

I think there is a risk in focusing too much on the employment numbers. Yes, in terms of the overall economy, but no in terms of selective industries.

The market needs time to assess the softness in the economy, but especially what, and when, Congress will act on the raising of the nation’ s debt ceiling.

If not raised by August 2, the country can be expected to default on certain obligations. Raising the debt limit has been done dozens of times over the last 30 years, but this time is different. It is now tied to the development of a plan to reduce the increasing national debt, and there are serious differences of opinion in Congress how to do that.

George Brooks

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