As noted yesterday, this bull market has room to run with so much cash targeting stocks, but there are unrealized gains, as well. The S&P 500 is up 145% from its March 6, 2009 bear market low, and up 14% this year alone.
A correction will most likely come unannounced, starting inconspicuously as a blip, then feeding on itself as investors see paper gains slipping away.
When it comes, Odds favor a sideways-to-down correction, more of a consolidation than abrupt plunge, but nevertheless, a change in the “notching up” pattern we have been seeing.
The market’s technical indicators suggest a near-overbought condition, but we have been here before and the market plodded through it without any damage.
Traders may use strength today to take some profits. I think we will soon know if the BIG money used Q1 earnings to lighten up. It often acts contrary to the general flow of funds generated by institutional money managers. This week was exceptionally light on economic news, so expect next week to be heavy.
Support is DJIA 14,976 (S&P 500: 1,616). Resistance is DJIA 15,122 (S&P 500: 1,632).
Investor’s first read – an edge before the open
S&P 500: 1,626.67
Nasdaq Comp.: 3,409.17
Russell 2000: 965.98
Friday, May 10, 2013 (9:12 a.m.)
Apple (AAPL: $456.41)
Sellers who put a lid on AAPL Wednesday at $465 were there again yesterday, this time a little lower ($462). There should be some buying between $453 and $454. There is a chance it can drop to the $436 - $443 area. It has had a 21% move in less than a month. For some traders, that’s enough.
I am not long or short AAPL.
FACEBOOK (FB - $27.08)
FB tried to turn up yesterday, but ran into a seller at $27.50. It needs a buyer in-size to prevent a further slip, this time to $25.95 - $26.13.
I am not long or short Facebook.
SEQUESTER: Stay tuned, it is starting to hit. Erskin Bowles told CNBC Squawk Box recently sequester is a “stupid” way to handle deficit reduction.
At some point, the question will be raised about the sequester’s impact on the economy, notwithstanding the uncertainty it brings to persons at risk, directly and indirectly.
It is too early to expect anything to show up in the indicators, and it may never be a major issue if our economic recovery gains traction.
It is one of those potential negatives one has to consider along with other ingredients that lead to a decision to buy or sell.
Employers (government or private) may opt to furlough employees without pay, cut back on hours rather than release them to unemployment at the expense of the government. Even so, several weeks without pay has an impact on the economy.
This is one of those uncertainties that, along with a few others, can trigger a consolidation or pullback in the stock market.
The reports on the economy are light this week with Thursday’s Jobless Claims and Fed Chief Bernanke’s speech at 9:30 Friday heading up the two key scheduled events for the week.
Fed Chief Bernnke speaks (9:30)
Treasury Budget (2:00 p.m.)
“Investor’s first read – an edge before the open”
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