Investor’s first read – Brooksie’s edge before the open
Thursday, June 14, 2012 8:08 a.m. ET
(released one hour earlier than usual, does not include Jobless report)
S&P 500: 1314.88
Nasdaq Comp.: 2818.61
Russell 2000: 752.38
The Greek elections Sunday most likely will determine if Greece stays with the euro. That is not Europe’s only problem. As most of the Street knows, we have Spain and concerns about Italy’s ability to survive its debt woes in face of a worsening euro-recession.
While the stock market has held up well in face of all this adversity and uncertainty, it will be hard-pressed to rally before the weekend without a major initiative by European leaders.
I have reminded readers that our stop-go economy is normal following the worst recession since the 1930s.
However, I suspect part of the current slowdown is caused by a conscious/subconscious concern for the horrors of the looming “fiscal cliff,” over which all 312 million Americans are warned they will plunge after January 1.
I suspect most Americans would be hard-pressed to define “fiscal cliff,” but that doesn’t matter, just the thought of a “cliff,” is enough.
I’ll take outright bad news over “uncertainty” any day. The stock market can adjust to adversity, but not to uncertainty.
That’s our dilemma now, that’s why the news whipsaw rules.
This is the kind of irregularity that can devour a trader’s portfolio faster than bluefish feeding on bunker.
TODAY: A rally will be tough to sustain with the weekend looming. Tomorrow’s Empire State Manufacturing, Industrial Production and Consumer Sentiment reports must be neutral or better than expected to avert a further sell off to the DJIA 12,200 (S&P 500: 1285) area.
Expect surges in both directions to be followed by reversals.
Facebook (FB) – I suspect shorts have been covering early in the day, then backing off to let the stock’s price slip back down by the close of trading. As long as a big name institution doesn’t release a huge endorsement, the shorts can cover at will. The 26.75 – 27 area is key. Breaking down through that area would signal weakness and the possibility of a further decline. Based on the stock’s technical action, I would think shorts would be smart to cover part of their position in this area.
I usually don’t write about stocks, but decided to in this case since this was such a visible and controversial issue, I thought it deserved coverage, since at 34, it looked dangerously risky.
Note: I don’t now, nor have I ever held, a long or short position in FB.
ECONOMIC REPORTS: With economies in Asia and Europe sagging, the Street is watching to see which direction the U.S. economy will take.
Will this trigger QE3 by the Fed.?
NFIB Small Business Optimism Index (7:30): The Optimism Index slipped slightly in May 0.1% to 94.4. Employers continue to have difficulty finding qualified people to hire, // m
Import and Export Prices (8:30): Lower energy and food prices contributed to the largest drop in two years. Overall May import prices declined 1.0% vs no increase in April.
Treasury Budget (2:00p.m.): April posted a $59.1 billion surplus, the first in 3 ½ years bringing the year-to-date deficit down to $719.9 billion well below the year ago deficit of $869.8 billion.
Produces Price Index (8:30): Dropped 1.0% vs. a 0.2% decline in April as a result of plunging energy and food prices.
Retail Sales 8:30): Decline 0.2% in May vs. a decline of 0.2% in April.
Business Inventories (10:00): Inventories rose 0.3% in March as sales rose 0.6%. The inventory-to-sales ratio stands at 1.27
Jobless Claims (8:30): Claims fell 12,000 to 377,000 for the June 9 week.. The 4-week average in 377,750
Consumer Price Index (8:30): Unchanged in April after a 0.3% rise in March. Excluding food and energy, it was up 0.2% vs. the same in March.
Empire State Manufacturing Index (8:30): The Index rose 10.53 points to 17.09 in May. New Orders were up to 8.32 from 6.48 after a strong increase in shipments.
Industrial Production (9:15): Jumped 1.1% after a 0.6% drop in March.
Consumer Sentiment (9:55): Index was up 3 points in May to 79.3 from April.
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.