Brooksie’s Daily Stock Market blog – an edge before the open
Friday, December 30, 2011 9:08 am ET
DJIA: 12,287.04 S&P 500: 1263.02
I’m not going to tell you what to expect in 2012, because I don’t know. What’s more, what is so special about the New Year ? Why forecast now ? Does this time of the year offer a better window of prescience for forecasters ? How about a forecast for the coming 12 months in September, before most of the market surges usually occur. That would be more helpful.
Sounds like a person who is burnt out by the Holiday Season ?
What’s my point ?
Don’t “overweight” New Year Forecasts.
They facilitate publications and coincide with the time many people feel they must get a new start in their lives, but focusing on these forecasts can be misleading. What’s more, once a forecast is in print, there is a tendency to defend it in face of events that require a change in thinking.
The real investment year begins in October give or take a few weeks, and that’s the basis for the Stock Trader’s Almanac’s “Best Six Months” for investing in stocks. To-date the broad-based S&P 500 is flat. Since its Oct. 4 low, it is up 18%. The Best Six Months officially begins on Nov. 1 and ends Apr. 30 as it did last May 2 with the S&P 500 topping out at 1370, some 8% above yesterday’s close.
CONCLUSION: Once again the market is knocking on the top door of a trading range set in motion in late October with a breakout above DJIA: 11,740 (S&P 500: 1240) and carrying all the way to DJIA: 12,300 (S&P 500: 1277).
The market can break out here and run much higher. If it doesn’t break and run, good money can be made, but timing is critical, i.e. investors must buy on consolidations and dips, or target new leaders that stand to “notch” up.
Once past the inconsistent year-end market action in stocks caused by tax selling and institutional portfolio “window dressing,” we can get a better fix on the trend of stocks.
TODAY: Barring any new unpleasant salvos out of Europe, we should see some nice market action in stocks that stand to do well in 2012, though the market averages may not reflect it.
What I am saying is, strong stocks today may be winners next year.
EUROPEAN UNION/EUROZONE
The European Union (EU) is an economic and political union of 27 sovereign member states with origins going back to 1958, but which was officially established by the Maastricht Treaty in 1993. Its goals are a free movement of goods, services, capital and people differing in life style, language, economies, geography, religion, politics and history.
Its 27 Members include: Austria, Belgium Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. The EU comprises a population exceeding 500 million people a GDP exceeding 16.2 billion USD, some 20% of the world’s GDP.
Important components of the EU include: European Parliament, European Commission, Council of European Union, European Council Court of Justice and European Union, and the European Central Bank.
The euro area (eurozone) is an economic and monetary union (EMU) of 17 member nations that use the “euro” as their common currency and sole legal tender. Its members include: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.
While the goal of single currency originated with the European Economic Community (EEC) in 1969, it was not until 1993 that members were legally bound to start the monetary union no later than January 1, 1999. At that point, the euro was launched after which it was an “accounting” currency until January 1, 2002 when euro notes and coins were issued and national currencies phased out in the eurozone.
The European Central Bank (ECB) is the central bank for the eurozone. Governed by its president, Mario Draghi, and a board of the heads of national central banks, the ECB’s primary responsibility is to maintain the euro’s purchasing power and price stability within the eurozone.
The Eurosystem is the monetary authority of the eurozone comprised of the ECB and the central banks of its member states, which are charged with applying the ECB’s policy.
The European Commission, comprised of one commissioner from each of the 27 member states, represents the interests of the EU, drafts proposals for laws, and manages the day-to-day business and disbursement of funds.
European Banking Authority (EBA): Established on Jan. 1, 2011 as a regularity agency to conduct stress tests of banks in order to detect weaknesses in capital structure. It has the power to overrule national regulators if necessary to prevent unfair competitive advantages between jurisdictions. It issues a report, Common Reporting Framework (COREP) covering capital requirements regarding credit risk, market risk, operational risk, fund and capital adequacy ratios.
The European Financial Stability Facility (EFSF): created by eurozone members to safeguard financial stability in Europe. Authority includes loans to countries in need, intervention in primary and secondary markets pursuant to ECB analysis, finance recapitalizations of financial institutions. It is backed by guarantee from the eurozone members for a total of 780 billion euros and has a lending capacity of 440 billion euros. (not considered adequate)
One euro = 1.3035 U.S. dollar (12/21)
Prominent names: European Union President: Herman van Rompuy, European Central Bank President: Mario Draghi, European Commission President: Jose Manuel Barroso, German Chancellor: Angela Merkel, French President: Nicolas Sarkozy, Italy Prime Minister: Mario Monti, EFSF President: Klaus Regling
Super Committee: While the committee failed, I am keeping this up FYI, since it will continue to get press coverage prior to the “trigger” in January.
Jan. 15, 2012: Date that the “trigger” leading to $1.2 trillion of future spending cuts goes into effect if the committee’s legislation has not been enacted.
Feb. 2012: Approximate time when first $900 bn of debt ceiling runs out.
Feb./Mar.2012: Deadline for Congress to consider a resolution of disapproval for the second tranche ($1.2 – $1.5 trillion) of debt limit increase.
Fall/Winter 2012: When additional $2.1 – $2.4 trillion of borrowing authority from this law runs out.
Jan.2, 2013: OMB orders sequestrations for defense and non-defense categories of spending necessary to meet spending cuts required by the “trigger.”
Recent blog headlines:
Dec. 6, DJIA: 12,097, “Mounting Uncertainties Call for a Pullback of 200 – 300 Dow Points”
Dec. 7, DJIA: 12,150, “Easy Does It ! No Room For Disappointment at Euro Summit
Dec. 8, DJIA: 12,196, “Getting Close to Tectonic Shift- Pessimism to Optimism.”
Dec. 9, DJIA: 12,184, “Good Summit – Uncertainties Linger”
Dec.12, DJIA: 12,184, “Summit’s Success Questioned – Market Seeks Comfort Level”
Dec.13 DJIA: 12,021, “Money Managers Pondering Risk/Reward”
Dec.15, DJIA: 11,954 “More Consolidation Needed”
Dec. 16, DJIA: 11, 568 “ Market Probing for a Level that Discounts Euro-Uncertainties”:
Dec. 19, DJIA: 11,866 “BIG Week: Economic Reports – Watch Housing”
Dec. 20, DJIA: 11,766 “ The U.S. Economy – Last Man Standing ?”
Dec. 21, DJIA: 12,103 “ Housing Turnaround = Wealth Effect Rebound = Economic Expansion”
Dec. 22, DJIA 12,107, “Trading Range Intact
Dec. 23, DJIA 12,169 “Don’t Take the Day Off”
Dec. 27, DJIA: 12,254 “Selective Opportunities”
Dec. 28, DJIA: 12,291 “Market Attempting to Break Out of Trading Range”
George Brooks
*Bloomberg,com
**National Journal
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The writer of Brooksie’s Daily Stock Market blog, 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.
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