Investor’s first read – Brooksie’s edge before the open
Tuesday, February 21, 2012 9:09 a.m.
DJIA: 12,949 S&P 500: 1361
Greece got its approval yesterday, so that cliffhanger is out of the way for now. Nevertheless, worries will persist as investors doubt the 130 billion euro ($173) bailout will be sufficient. European stocks traded lower on the news, U.S. stock-index futures were only ahead minimally prior to the open.
What’s important here is the risk of contagion has been taken off the table for the time being, giving investors a reason to be buying stocks, since other alternatives (treasuries, CDs, money markets, etc.) yield next to nothing.
Seems that if there is not a wall of worry there, the Street will quickly build one anyhow.
This European ‘thing” will be with us for years. It is critical that global growth is restored, or Greece will not be the only euro-area country to bite the dust, Spain probably being the next “worry.”
Until then, our bull market can continue albeit with a correction between now and April when earnings reports begin to surface again.
CONCLUSION: Some selling possible by the “sell on good news” investors, which could drop the DJIA to the 12,860 area (S&P 500: 1352).
Over the weekend, I looked for attractive situations to buy, but found that though fundamentally attractive, many needed a breather before moving higher. This is when investors turn to issues of lesser quality which haven’t participated in the October – February run.
Stocks that have had a nice run since then don’t have to sell off very much before moving higher, just consolidate sideways to let profit-takers lock-in gains to remove overhead supply that would restrict the stock from moving higher.
With so many stocks needing a consolidation, timing will be critical in coming weeks.
ECONOMIC NEWS: A light week for economic reports unless some surprise on the downside.
- ICSC Goldman Store Sales (7:45 a.m.) a sampling of major retail sales (10% of total )
- Existing Home Sales (10 a.m.) – December was up 5 pct. For third straight month which drew down the supply on the market to 6.2 million the lowest since 2006.
- Jobless Claims (8:30 a.m.) – down 13,000 for week ended Feb.11 to 398,000, the 10th time in last 11 periods. Continuing claims were down 100,000 for week ended Feb. 4.
- FHFA House Price Index – was up 1.0 pct. In Nov. after a drop of 0.7 pct. In Oct. Eight of the 9 census divisions were up.
- Consumer Sentiment (9:55 a.m.) – early Feb. reading was down 2.5 pct.
- New Home Sales (10 a.m.) – short of expectation in Dec. With a drop of 2.2 pct. , but follows three monthly increases of Nov. 4 pct, Oct. 1.7 pct., Sept. 2.3 pct.
Jan 23 DJIA: 12,720 “Europeans Seeking Long-Term Economic Cure“
Jan 25 DJIA: 12,675 “Consolidation, Correction Likely though US Stocks Hold Strong Against EU Turmoil“
Jan. 26 DJIA: 12,756 “Fed Would Raise Interest Rates If Inflation Picks Up“
Jan. 27 DJIA: 12,734 “Warning! Tradable Market Action Lies in Waiting“
Jan. 30 DJIA: 12,660 ““HUGE” Week for Economic Indicators“
Jan. 31 DJIA: 12,653 “All That Is Needed Is a Spark“
Feb. 1 DJIA: 12,632 “Week’s Economic Reports Could Be The Springboard“
Feb. 3 DJIA: 12,862 “Investors Beating the Bullish Tune“
Feb. 6 DJIA: 12,845 “Follow the Money as It Exits Safe Havens“
Feb. 7 DJIA: 12,878 “Market Held Up By Sneaky Buying“
Feb. 8 DJIA: 12,883 “Is It Safe For Bulls to Come Out and Play?“
Feb. 9 DJIA: 12,890 “BIG Money Buying the Future“
Feb. 10 DJIA: 12,801 “Can a Greek Deal Be Accomplished Over the Weekend?“
Feb. 13 DJIA: 12,874 “Easy Does It! Some Selling Into Good News Expected“
Feb. 14 DJIA: 12,878 “Investors Should Expect “Market Churn”“
Feb. 15 DJIA: 12,780 “Market Churn to Include Brief Correction“
Feb. 16 DJIA: 12,904 “Another Snag in Greek Bailout + Long Weekend = Extended Correction“
Feb. 17 DJIA: 12,949 “Investors Establish Bullish Turf“
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.