Test of May's Lows - Calming Announcements Imminent?

George Brooks |

Test of May's Lows - Calming Announcements Imminent?Investor’s first read      - Brooksie’s edge before the open

Wednesday, May 30, 2012        9:15 a.m. ET

DJIA:  12,580.69
S&P 500:   1332.42
Nasdaq Comp.: 2870.99
Russell 2000:  777.16

CONCLUSION:  More misery…but expect announcements that  measures are about to be implemented by European leaders to minimize the crippling  domino effect of Greece’s fiscal and economic tailspin and Spain’s efforts to avoid default.

Reassuring announcements are designed to buy time and calm a public panic.  They also can create premature euphoria, which in this case stands to trigger a rally.

Such a rally can suck investors in prior to another leg down in stock prices when it becomes obvious that solutions are  not guaranteed or will take longer than expected to implement.

It is possible, the market will simply plunge now  to a level the Street feels discounts all possible adversities and we will have to credit the small rebound over the last four days as “the rally” prior to another leg down.

While common sense suggests Europe’s leaders have some solutions ready to deploy

There are signs that the U.S housing market has finally turned the corner. Its demise has contributed  mightily to the nation’s economic woes and America’s “wealth effect,” a sense of financial well being. Pending Home Sales, at 10 a.m. will confirm, or deny, this important development is under way.

Without the “European thing  improved housing stats would have a much greater impact.  As emphasized in my December 19 post, the recovery of this industry is vital  and will contribute rather than inhibit economic growth this year, but its impact is neutralized by  Europe’s problems (for now).

FACEBOOK (FB): I still see 24-26, most likely today or tomorrow. It has two black eyes on the Street. Panic could set in and take it below 20 where it would be very attractive for traders, but a bid would have to be on the books to catch it there.

I think we are in for a rough summer.  There is very little consistency among analysts. Buy recommendations by some analysts are countered by sell recommendations by other analysts.  In fact it doesn’t take a sell to batter a stock, just a shift from positive to neutral.

I have always felt that the Street’s focus was too short-term oriented – quarterly earnings and guidance.  If a company “misses,” its stock gets hammered, even when the reason is insignificant to the longer term outlook. It’s a casino.

This used to be a great business – it is now a crapshoot, plain and simple. The quick and gutsy can play it, but the public doesn’t have a chance. Even if  an individual invests in a managed account, their timing must be precise.

In it for the long-term ???

You better enter and exit at the right time.


The right time is usually when the news is so scary, few people have the courage to buy.  Instead, they wait until they are absolutely assured it’s safe to buy when the outlook is GREAT.   Unfortunately, that is usually close to a top.

Human nature (you) are the biggest deterrent to making money, though a close second is the reliability of fundamental analysis coming out og Wall Street;

A recovery in the housing market is necessary if the U.S. economic recovery that started in mid-2009 is to gain momentum from its present levels, and especially if it is going to hang tough in face of weakening economies in Europe and Asia.

ECONOMIC REPORTS: One of the biggest worries facing investors is the direction of the U.S. economic recovery. This is a big week for reports. The more important reports are noted here. Investors will be awaiting Thursday’s ADP Employment and Friday’s Employment Situation reports.


S&P Case Shiller Home Price Index (9:a.m.):  Home prices declined 2.6^ vs. a year ago. This is down from  February’s year over year decline of 3.5% supporting views that a turn around in housing is at hand.

Consumer Confidence (10 a.m.): Declined for the 3rd straight month bringing the Index for May down to 64.9 from 68.7 in April.


Pending Home Sales (10 a.m.); Jumped 4.1% in March confirming a rebound in this vital industry


ADP Employment Report (8:15 a.m.): April was a disappointing gain of 119,000 hires vs. 201,000 in March.

Q1 - GDP (8:30 a.m.) the second estimate for Q1, showed a gain of 2.2% vs. a gain of 3.0% in Q4. Government spend was a major contributor to the softness.

Jobless Claims (8:30): for the week May 19 declined 2,000 to 370,000  bringing the 4-week average  to 370,000.

Chicago PMI (9:45 a.m.): The Index slowed to 56.2 in April from 62.2 in March.


Employment Situation: increased by 115,000 in April after gains of 154,000 in March and 259,000 in February.

ISM Manufacturing Index (10 a.m.): Rose 1.4% in April to 54.8. New orders were ahead to 58.2 from 54.5.

Construction Spending (10 a.m.) rebounded 0.1% in March after a drop of 1.4% in March.

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.

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