Stocks Must Hold Key Level From June Rebound

George Brooks |

June 4 Rebound "Must" Hold or ElseInvestor’s first read - Brooksie’s edge before the open

Thursday July 12, 2012 6:35 p.m.

DJIA: 12,609.53

S&P 500: 1341.45

Nasdaq Comp.: 2887.98

Russell 2000: 792.26

Opinions about more stimulus or staying the course were mixed per the minutes of the most recent FOMC meeting. Likewise in the Street, some see QE3 as an increasing possibility others don’t.

Goldman Sachs cut its estimate for Q2 GDP to 1.3% after studying data from wholesale inventories and the trade deficit.

While the stock market has held up well in recent weeks, it has done little to celebrate the Europe summit accord designed to address its sovereign debt problems.

This suggests other factors weigh on the market and economy, namely uncertainty about a global recession, the November elections and a Congress that simply won’t compromise on key issues.

Add to that Q2 corporate earnings which are not expected to make pleasant reading, and institutional investors have reason to “wait” before investing
aggressively.

CONCLUSION:

My concern is that the rebound that started June 4, is in jeopardy. Key support at DJIA 12,450 (S&P 500: 1310) must hold to avert a greater decline.

Failure of the June 4 rebound stands to take stocks down to the DJIA 11,500 (S&P 500:1230) area.

What could change this scenario ?

The Fed could announce a major stimulus program, which many would argue would be meaningless, but psychologically it would spark a strong rally taking the DJIA up across 13,000 (S&P 500: 1388).

Likewise, Q2 corporate earnings could surprise the street, but I don’t see that as having as much impact as the Fed.

ECONOMIC REPORTS: A light week for economic reports.

MONDAY:

Consumer Credit (3:00p.m.) – Surged $17.1 billion in May,  more than forecast, driven by the biggest jump in credit card debt in 5 years.  Estimates ranged from $4 billion to $15.6 billion with the median forecast by 32 economists surveyed by Bloomberg News.

TUESDAY:

NFIB Small Business (NFIB) Optimism Index (7:30a.m.) -  The index of confidence among 740 small business  owners  declined to 91.4 in June from 94.4 in May  reflecting an increasing lack of optimism by small business leaders, edging 0.1% lower in May. I would be surprised if this index lifts before fall.

WEDNESDAY:

Wholesale Trade (10:00a.m.) – Slight improvement in the trade gap in April due to a drop in imports as trade gap declined to %50.1 billion from $52.6 billion in March. The gap has been narrowing since early 2010.

FOMC Minutes (2:00p.m.) – The Street will study the minutes for a clue to future Fed policy, especially for the possibility of further economic stimulus.
THURSDAY:

Jobless Claims (8:30) – Fell 14,000  foe June 30 week to 374,000. The 4-week average  stands at 385,750.

Treasury Budget (2:00p.m.) – The Treasury deficit is down 8.9%  eight months into government FY vs. a year ago. Receipts are up 5.4%, outlays off a smidge.

FRIDAY:

Producer Price Index (8:30a.m.) - Dropped 1.0% in May  after a drop of  0,2% in April.  PPI has beenin a slide since August 2011.

Consumer Sentiment (9:55a.m.) – Index dropped to 72 in final two weeks of June.  Now down  from a 2011 year-end of 75.

George Brooks

…………………………………………………………………………

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.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ATNY API Technologies Corp. n/a n/a n/a 0

Comments

Emerging Growth

GSV Capital Corp

GSV Capital Corp is an externally managed, non-diversified closed-end management investment company. The Company has elected to be treated as a business development company.

Private Markets

GoCoin

Blockchain currencies (e.g. Bitcoin) provide a new disruptive way to transfer value between parties over the internet as opposed to going through banks. GoCoin provides online merchants with a suite…

Wealthfront

Wealthfront is an automated investment service that serves as an alternative to traditional financial advisory services. The company manages a diversified, continually rebalanced portfolio of index funds on their clients’…