Investor’s first read - Brooksie’s edge before the open
Wednesday, May 23, 2012 9:12 a.m. ET
S&P 500: 1316.63
Nasdaq Comp.: 2839.08
Russell 2000: 759.63
Last Thursday, I wrote I saw a two-legged decline before the markets achieve stability. The first leg down, I said would find support at DJIA 12,275 (S&P 500: 1292). Friday’s lows before the rebound were DJIA 12,317 (S&P 500:1295).
The market will now test those lows. I do not see this test as the second leg down. News flow may take us down to a low that discounts Europe’s problems, doubts about our economic recovery and the ugliness of the presidential campaign.
The Facebook (FB) debacle created a lot of overhead supply, sellers waiting to get out even or with a smaller loss than they have now. I still think it will hit 24 - 26 before stabilizing.
There is a big European Union summit today where Germany’s Angela Merkel and France’s president, Francois Hollande are bound to lock horns over a tradeoff between stimulus and austerity as solutions for Europe’s sovereign debt issues.
Opinion is divided whether European leaders will be able to head off contagion in the event Greece pulls out of the euro. Someone is bound to be right, the problem is “who.”
This takes us back into the uncertainty quagmire.
Today: Down to test the 200-day line in the area of S&P 500 1285. That test should trigger computer buying. Failure to hold would set up a washout and the first of two bottoms in this plunge that started in May.
The Euro-summit tomorrow and FB’s market action stand to discourage aggressive buying.
He writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, ar e 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.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer