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Uncertainty Rules – But Trader’s Opportunity Looms Wednesday Morning

Brooksie's Daily Stock Market blog - an edge before the openTuesday, November 22, 2011    9:16 am ESTDJIA: 11,547.31     S&P 500: 1192.98I thought there was a chance the SuperCommittee

Brooksie’s Daily Stock Market blog – an edge before the open

Tuesday, November 22, 2011    9:16 am EST

DJIA: 11,547.31     S&P 500: 1192.98

I thought there was a chance the SuperCommittee would produce at least a bare bones plan,  something to reduce the automatic slashing of budget cuts by the sequester trigger. That can still be done by Congress in regular session, and odds strongly suggest it will. Unfortunately, whatever is proposed or done will march to the 2012 Presidential Election drumbeat.

Nevertheless, the SuperCommittee’s failure reminds everyone that  the people sent to Washington to do a job refuse for partisan reasons to do it – i.e. do it my way or no deal.

When UNCERTAINTY rules, companies tend to defer decisions, money managers sell or cut back on commitments and the consumer tightens their purse strings – the result is  a stagnant economy, possibly a recessionary economy.

America deserves better than this, BUT it is the American voter who put these people in office.

When asked what kind of government the Constitutional Convention of 1787 provided, Ben Franklin replied, “A republic, if you can keep it.”

Adversity tends to provide investors with an opportunity to buy-in at attractive prices,  and no one can argue that the current prospects are gloomy. What makes a decision to buy here difficult is the stock market is up  some 80% from its March 2009 bear market bottom and off  only 12% from its May 2011 bull market top.

We are dealing with a double-header here – Europe never went away, its dire situation has gotten worse during the few days that attention was focused on the SuperCommittee.  What is most disturbing is it doesn’t look like anyone  has a solution.

TODAY:  Without reassuring news out of Europe, I expect any rally today to yield to selling pressures and another drop spilling over to early trading tomorrow with the potential for the DJIA to drop to 11,300 (S&P 500: 1165), followed by a nifty bounce. That would dovetail nicely with some lore from the Stock Trader’s Almanac, which  reminds us that over the last 35 years, the Wednesday before and Friday after Thanksgiving have a great track record for  advances in the DJIA.

Super Committee:   

Nov. 23: Deadline for both houses to vote on a plan with a 10-year deficit reduction  goal of $1.5 trillion Dec. 2: Deadline for committee to submit report and legislative language to President Obama and Congress. Looks like they blew it !

Dec. 23: Deadline for both houses to vote on committee bill.

Jan. 15, 2012: Date that the “trigger” leading to $1.2 trillion of future spending cuts goes into effect if the committee’s legislation has not been enacted.

Feb. 2012: Approximate time when first $900 bn of debt ceiling runs out.

Feb./Mar.2012: Deadline for Congress to consider a resolution of disapproval for the second tranche ($1.2 – $1.5 trillion) of debt limit increase.

Fall/Winter 2012: When additional $2.1 – $2.4 trillion of borrowing authority from this law runs out.

Jan.2, 2013: OMB orders sequestrations for defense and non-defense categories of spending necessary to meet spending cuts required by the “trigger.”

Recent blog headlines:

Oct. 21, DJIA 11,541,    “DJIA 12,000 “IF” the Europeans Can Get It Right”

Oct. 24, DJIA 11,808,    “Euro-Solution Announcement After Wednesday’s Meeting”

Oct. 25, DJIA 11,913,    “Short-Term Euro-Solution Doesn’t Cut It”

Oct. 26, DJIA 11,706,    “Ball’s in Europe’s Court”

Oct. 31  DJIA 12,208,    “Buyers on Dips. Euro-Deal to Hit Some Snags

“Doomsters and Shorts Out in Force”

Nov. 2  DJIA: 11,637,     “Risk-Taker’s Buy Shaping Up”

Nov.3   DJIA: 11,836,    “Again – It’s  All About Europe”

Nov.4   DJIA: 12,044,    “Easy Does It !  Traders to Take Some Profits”

Nov. 7  DJIA: 11,983,    “SuperCommittee Will Soon Take Center Stage”

Nov. 8  DJIA: 12,068,    “Stock Market Hanging Tough – Would Love to Run…. but…”

Nov. 9  DJIA:  12,170    “Italy’s Turn to Crunch Prices, But the SuperCommittee is in the On-Deck  Circle”

Nov. 10,  DJIA:  11,780, “ OK Greece and Italy– Decision Time !”

Nov. 11,  DJIA:  11,893, “Potential for an Upside Breakout Looms, Absent New Negatives”

Nov. 14,  DJIA:  12,053, “SuperCommittee and Economy Taking Center Stage”

Nov. 15,  DJIA:  12,078, “European Outlook Tentative – U.S. Outlook Picking Up”

Nov. 16, DJIA:   12,096, “Europe – Surprise Us for a Change – Get the Job Done !”

Nov. 17, DJIA:  11,905,  “Time for European Leaders to Avert Contagion – European Central Bank to the Rescue ?”

Nov. 18, DJIA:  11,770,  “Stock Market a Coiling Spring ?”

Nov. 21, DJIA:  11,796,  “Occupy Washington”

George  Brooks

*National Journal


The writer of Brooksie’s Daily Stock Market blog, 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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