Investor’s first read Brooksie’s edge before the open
Friday, February 24, 2012 9:10 a.m. ET
DJIA: 12,984.64 S&P 500: 1323.46
Concern for rising gas prices is picking up where fears of contagion in Europe left off with the second bailout of Greece. The headlines aren’t necessary to alarm consumers who only have to pump gas two weeks in a row to know prices are rising.
The increase in oil and gasoline prices are due to Mid-East tensions, Iran’s retaliation to sanctions, China’s increasing use of oil, and the economic recovery here and selectively abroad. However, I think to some extent due to “hype” by speculators, looking for a score and of course in some cases a political ploy against the Obama administration in an election year.
Doomsters won’t miss the opportunity here to bark about how devastating increasing fuel costs will be on our economic recovery. Of course, the loser is the consumer.
The truth will out, not much investors can do about it. This bull market seems to be more of an obstacle course than a matter of “climbing a wall of worry.”
What is important is investors recognize this is the new bully on the block and it can impact the stock market temporarily.
CONCLUSION: I believe the upside for the overall market is limited, though selected issues will run. I see a correction of 5% to 7% sometime before early April, but one which will be followed by a sharp rebound.
This stands to make it more difficult to make money in ETFs that are focused on the market averages until we get a correction/consolidation. A lot of stocks have had a sharp run up. While the long-term potential of these is for yet higher prices, near-to intermediate-term potential is limited. I am finding values in my scan of stocks, but so many have had a big run, I simply would rather let them “rest” for a while as investors with gains lock in some profits potentially pressing prices lower.
Obviously a cash reserve would enable investors to capitalize on such a development.
ECONOMIC NEWS: A light week for economic reports.
- ICSC Goldman Store Sales (7:45 a.m.) a sampling of major retail sales (10% of total )
- Existing Home Sales (10 a.m.) – December was up 5 pct. For third straight month which drew down the supply on the market to 6.2 million the lowest since 2006.
- Jobless Claims (8:30 a.m.) – down 13,000 for week ended Feb.11 to 398,000, the 10th time in last 11 periods. Continuing claims were down 100,000 for week ended Feb. 4.
- FHFA House Price Index – was up 1.0 pct. In Nov. after a drop of 0.7 pct. In Oct. Eight of the 9 census divisions were up.
- Consumer Sentiment (9:55 a.m.) – early Feb. reading was down 2.5 pct.
- New Home Sales (10 a.m.) – short of expectation in Dec. With a drop of 2.2 pct. , but follows three monthly increases of Nov. 4 pct, Oct. 1.7 pct., Sept. 2.3 pct.
Feb. 6 DJIA: 12,845 “Follow the Money as It Exits Safe Havens“
Feb. 7 DJIA: 12,878 “Market Held Up By Sneaky Buying“
Feb. 8 DJIA: 12,883 “Is It Safe For Bulls to Come Out and Play?“
Feb. 9 DJIA: 12,890 “BIG Money Buying the Future“
Feb. 10 DJIA: 12,801 “Can a Greek Deal Be Accomplished Over the Weekend?“
Feb. 13 DJIA: 12,874 “Easy Does It! Some Selling Into Good News Expected“
Feb. 14 DJIA: 12,878 “Investors Should Expect “Market Churn”“
Feb. 15 DJIA: 12,780 “Market Churn to Include Brief Correction“
Feb. 16 DJIA: 12,904 “Another Snag in Greek Bailout + Long Weekend = Extended Correction“
Feb. 17 DJIA: 12,949 “Investors Establish Bullish Turf“
Feb. 21 DJIA: 12,965 “The Market’s Stall is Deceptive While Selected Issuers Could Hum“
Feb. 22 DJIA: 12,938 “Rotation of Strength: Continuing Opportunities as Market Averages Remain Sluggish“
Feb. 23 DJIA: 12,984 “Market Stall Masks Opportunities“
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.