Monday, November 7, 2011 8:52 am EST
DJIA: 11,983 S&P 500: 1253.23
Breathtaking volatility reigns, and investors are just going to have to deal with it.
What needs to be remembered here is that the DJIA surged 16% since October 4 before entering a six day consolidation phase. This consolidation needs more time to adequately digest October’s sharp upmove.
Barring yet another ugly surprise, support looks good at DJIA 11,560 (S&P 500: 1215). Resistance starts around DJIA 12,050 (S&P 500: 1260).
This is just not a market where it is a good idea to chase running stocks. The runs are too short-lived.
European uncertainties still dominate the big picture. For many months, Greece held the world hostage, flirting with bankruptcy and the prospect of a domino effect spreading contagion across much of the European financial community.
Two weeks ago, European leaders hammered out the framework of an agreement to address all these risks, but hit a snag when Greek Prime Minister George Papandreou opted for a referendum vote on the bailout plan. But, Papandreou is now stepping down, yielding to a national unity government intended to resolve its problems and secure necessary financing for its woes.
Last week the Group of 20 refused to provide more funds to the International Monetary Fund (IMF) to help in the bailout, demanding more details and more sacrifices by troubled countries. What’s more, concerns about Italy have replaced Greece, as its Prime Minister, Silvio Berlusconi is on the verge of being replaced. The result – further delays in resolving problems.
With a key deadline looming on November 23, the actions of the SuperCommittee will soon come to the forefront.
The SuperCommittee has been lost in the shuffle, upstaged by international financial worries and the state of our economy here at home. Nevertheless, it will raise its ugly head to remind us whether our government is, or is not, dysfunctional.
12-member SuperCommittee timeline:*
Oct. 1- Dec. 31: Both houses of Congress must vote on a Balanced Budget Amendment.
Oct.: 14: Deadline for House and Senate Standing Committees to submit recommendations.
Nov. 23: Deadline for both houses to vote on a plan with a 10-year deficit reduction goal of $1.5 trillion Dec. 2: Deadline for committee to submit report and legislative language to President Obama andCongress.
Dec. 23: Deadline for both houses to vote on committee bill.
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:
Oct. 14, DJIA: 11,478, “Europe Still the Key – Q3 Earnings Run a Close Second”
Oct. 17, DJIA: 11,644, “Snags En Route to Euro-Solution to be Expected”
Oct. 18, DJIA: 11,392, “Test of the October 4 Rally’s Strength”
Oct. 19, DJIA: 11,577, “Best Six Months Looms, But Volatility to Continue”
Oct. 20, DJIA: 11,504, “All Eyes on Euro-Summit this Weekend”
Oct. 21, DJIA 11,541, “DJIA 12,000 “IF” the Europeans Can Get It Right”
Oct. 24, DJIA 11,808, “Euro-Solution Announcement After Wednesday’s Meeting”
Oct. 25, DJIA 11,913, “Short-Term Euro-Solution Doesn’t Cut It”
Oct. 26, DJIA 11,706, “Ball’s in Europe’s Court”
Oct. 31 DJIA 12,208, “Buyers on Dips. Euro-Deal to Hit Some Snags
“Doomsters and Shorts Out in Force”
Nov. 2 DJIA: 11,637, “Risk-Taker’s Buy Shaping Up”
Nov.3 DJIA: 11,836, “Again – It’s All About Europe”
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.