Investor’s first read – Brooksie’s edge before the open
Friday, May 11, 2012 9:15 a.m. ET
DJIA: 12855.04
S&P 500: 1357.99
Nasdaq Comp.: 2933.64
Russell 2000: 791.74
From time-to-time, I remind readers that normal 4% – 5% corrections become 8% to 12% corrections because new adversities surface just about the time the market is ready to turn up from a correction.
This is one of those junctures.
Buyers have stepped in to turn the market up on four occasions at these levels after sharp declines this year. Based on the price action and increased volume in recent days, the market looks like it is ready for another turn up.
I would like to agree, but new negatives weigh heavily on this support level.
We are looking at a greenstick fracture incapable of taking one more hit before yielding to a sharp drop to the DJIA: 12,275 (S&P 500: 1292) area.
Politics worldwide is unsettled to say the least. The rank ugliness of our presidential campaign will be unsurpassed in coming months.
While the U.S. economy appears to be strong enough to whether a European recession, that does not include a banking crisis from abroad.
Clearly, the Europeans should be prepared for the next round of potential contagion, however, there is enough uncertainty to keep investors on the sidelines.
Jolts like the one the Street got today from The announcement that JPMorgan Chase & Co (JPM) lost $2 billion on synthetic credit securities. These are bets on hypothetical credit instruments with credit default insurance. This is a credit derivative, it gets the label “synthetic” from the fact there is no real asset in the instrument, i.e., it is a bet made on the performance of another instrument.
Maybe they deserve to lose money on a trade like that. Who the Hell are these guys ? How do they get these jobs, are there any checks and balances ?
How destructive is this to the process of raising capital and maintaining a stable market for securities trading.
It is news like this that makes you ask, has anyone learned any lessons from the 2007 -2009 debacle ?
TODAY: Yesterday I said I expected another plunge down to test Wednesday’s lows (DJIA: 12,728), S&P 500: 1343) starting today or Friday. It started late yesterday as the major market averages gave back most of the day’s gains.
Without a pleasant surprise out of Greece today, I see another shot down as the market attempts to find support that discounts new negatives.
The market is at a critical juncture with the risk off breakdown to DJIA: 12,275 (S&P 500)1292.
MONDAY:
Consumer Credit (3:00) – Rose $21.4 billion in March, driven mostly by purchases of autos and funding of educational costs. Revolving debt which includes credit card debt increased $5.2 billion. The big jump in March follows an $8.7 billion increase in February following a revised $18.6 billion rise in January. A big jump in non-revolving credit for automobile purchases has driven a big seven month surge,
WEDNESDAY:
Wholesale Trade (10 a.m.) – wholesale inventories rose 0.9% in February, sales rose even more (1.2%), however the stock to sales ration remained unchanged.
THURSDAY:
International Trade (8:30 a.m.) The U.S. International Trade gap narrowed sharply in February to $46.0 billion from $52.5 billion. Both petroleum and non-petroleum goods contributed to the decrease.
Jobless Claims (8:30) – declined 1,000 in the week ended May 5 to 367,000 after a healthy 27,000 in the prior week. The 4-week moving average
Import/Export Prices (8:30) – Rose 1.3% in March as imported petroleum prices surged 3.0%.The rise in petroleum prices spilled over to industrial supplies.
FRIDAY:
Producer Price Index(8:30) – Unchanged in March after a big 0.4% rise in February. Core PPI gained 0.3%, following a gain of 0.2% in February. Energy decreased 1.0% after a 1.3% jump in February, however gasoline dropped 2.0% after a 4.3% jump in
February.
Consumer Sentiment Index (9:55 a.m.) –The Index increased to 76.4 in April from 76.4 in March.
George Brooks
*Bloomberg.com
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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.
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