In a market that is well balanced between buyers and sellers, the DJIA should have been able to drop more than it did yesterday when the DJIA hit 13,837 and S&P 500 hit 1,497 late in the day before a rally cut losses.
But this market is balanced in favor of the bulls as institutions clamor to invest cash and re-invest the proceeds from stocks they have sold for a profit or sold due to a change in rating. Both ways, it results in more buying than selling. Institutions have been buyers on dips, yesterday was a good example.
The street looks at the S&P 500 level of 1,500 as a key support. That level was the lower level of some extreme intraday volatility in late January and early February. It held yesterday, and the market will be rebounding sharply at the open today.
The media will make the most of next week with horror stories about the fallout if Washington doesn’t head off sequestration, but the Street isn’t buying it. Apparently, the Street either believes Washington will do something to mitigate a widespread adverse impact of sequestration before the deadline March 1 or shortly after. Then too, maybe the Street doesn’t think the impact will be that great if nothing is done.
This is a bull market that has climbed a huge wall of worry over the last 4 years, and it has waded through more fearsome challenges than sequestration .
Look for a jump in the DJIA of 85 to 95 points at the open. The key today is will the rally hold its gain. Odds favor it will. Resistance starts at DJIA 13,978 (S&P 500: 1,514). A rally failure would indicate a slide below DJIA 13,830 (S&P 500: 1,497).
Investor’s first read – an edge before the open
S&P 500: 1,502.42
Nasdaq Comp.: 3,131.49
Russell 2000: 905.40
Friday, February 22, 2013 (9:17 a.m.)
APPLE (AAPL: $446.06)
Little change from yesterday. APPL’s most recent attempt to stabilize was thrown into jeopardy Wednesday when persistent selling caused it to break down through support at $455. It is now testing two levels that produced enough buying in late January at $435 and early February at $442 to reverse its downtrend, albeit temporarily.
Failure to hold above $442 would suggest $400 is at risk. Resistance is $449. Down 36% from its September high, AAPL is obviously becoming attractive enough to lure buyers off the sidelines. The problem is the selling is just too steady, and at lower and lower prices to stop its slide.
I do not own, nor am I short Apple’s stock.
FACEBOOK (FB - $27.28) FB must move across $29.50 on heavy volume to reverse its negative pattern. Yesterday’s $1.18 plunge tested support at $27. A break below that moves support down to $25.80. Resistance is now $27.75.
I don’t own, nor have I ever owned FB. Generally, I don’t recommend or comment on individual stocks. I started covering FB technically after its IPO because on May 21. I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, which it did shortly thereafter. Following a rally back into the 30s, FB dropped into the low 20s where on August 2, I forecast a low of $16.88. On September 4, it hit $17.55, its low since its IPO at $38. I’ll continue technical coverage for a while to accommodate readers.
As for Apple, well it is a big-name stock that got shellacked in a short period of time, I wanted to help target a bottom as with FB. Comments are based on technical analysis only.
This will be another light week for economic reports.
But the Street is heartened by favorable economic data on employment, personal income, consumer sentiment, auto sales construction spending, durable goods manufacturing, and housing.
I am going to list the economic reports below but will not include the numbers from the last report, since those numbers are often revised significantly and therefore are potentially misleading.
I strongly urge you to access the website: www.mam.econoday.com for detailed reports on this week’s calendar and an excellent recap (plus graphs) of last week’s reports. The site does a great job graphically illustrating key indicators.
“Investor’s first read – an edge before the open”
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.