Stock Rallies to Run Into Resistance - Market Needs Time to Find a Comfort Level

George Brooks  |

I don’t see the Dow Jones Industrial Average getting much higher than 12,375 or the S&P 500 higher than 1325 on a rally here.

Much will depend on the Employment Situation report at 8:30 tomorrow.

A difficult trading market, even for the most agile trader.

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

Thursday, June 2, 2011 9:23 am EDT


DJIA: 12,290.14
S&P 500: 1314.55
Nasdaq Comp.: 2769.19
Russell 2000: 821.40j

If financial institutions bought stocks prior to the end of Q2, they obviously sold stocks on the first day of trading in Q3, quite likely winners that looked good in the quarter-ending report, but which are ripe for profit taking.

As suspected, economic reports are having a greater impact now that there is concern that the economic recovery is slowing.

Yesterday’s plunge in the ISM Manufacturing report for 300 firms and the shortfall in jobs added to the economy in the ADP report triggered a freefall in stock prices. Both reports were worse than expected.

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Today’s drop in Jobless Claims of an insignificant 6,000 wasn’t a help and we now are faced with another jobs report at 8:30 tomorrow, the Employment Situation report ( Private Nonfarm Payrolls). Economists surveyed expect the report to approximate 170,000 - anything less stands to adversely impact stock prices going into the weekend.

A similar softness in the economy happened last year at this time, and I don’t think this is too far off the norm in light of what happened in 2007 into early 2009.

We barely survived the worst economic crunch since the 1930s, the Street must acknowledge that. This isn’t one of our classic oaters where the good guy takes out the bad guy, gets the only pretty girl in the West and all viewers are reassured that life is predictably great.

With its bull market surge since March 2009, the stock market has anticipated a phenomenal economic recovery, but that doesn’t say there won’t be economic setbacks along the way.

That said, the stock market will suffer setbacks, as well, some technical as investors lock-in profits, others fundamental as stock prices adjust for breaking economic, national, and international news.

I know you know this, it’s common sense, but a lot of sensing the direction in the stock market is common sense and can be overlooked at times.

Must reading: All the Devils are Here, by Bethany McLean and Joe Nocera. This is an incredible blow-by-blow account of the buildup to the Great Recession – expertly written in a “can’t put down” style captivating ! How could this happen in this way?

George Brooks

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