Volatility Ahead - Plunges - Rallies - Plunges

George Brooks |

stock traders market wall streetThe U.S. stock-index futures indicate a  test of yesterday’s lows in early trading.

Under the right circumstances, a rally to DJIA 12,045 (S&P 500: 1278) is possible as the beginning of a volatile  basing action, which would set the stage for another  yet another failure and another plunge. We need some encouragement on the economic front to get that.

 Odds favor DJIA 11,690 (S&P 500: 1238) for today’s low point, from which it must rally, or else.

 I still see  DJIA:10,700-10,830 (S&P 500: 1150) by September/October, even DJIA 9,680 (S&P 500: 1050 if new negatives hit the market when it hits my first target.

The investment environment has changed in recent months and the stock market is frantically seeking a level that discounts these changes.

For one, there are signs that the economy is weakening more than can be
attributed to supply disruptions from Japan’s problems.  Then too, governing bodies at all levels are strapped for cash.  At a time when the U.S. government should be funding works programs for infrastructure projects, it is forced to slash outlays.

To make matters worse, it is doubtful our Congress can accomplish anything anyway with its three-way split.  A lot will depend on the composition of the “Super Committee.”  If the Republican Tea Party faction is in a position to obstruct progress, as it did with the debt default debacle, meaningful progress is a joke.

As noted in recent blogs, this is a big week for economic reports.  Fearing the worst, bloodied bulls would settle for so-so numbers, with scant hope for anything better.

With the drama of potential default behind us,  the financial press is quick to tout the prospects of another recession.

We’ve been here before. Softness in the economic numbers in mid-2010
prompted the Fed’s QE2 bond buying initiative. There’s talk of a QE3, but I
think it’s premature.

Yesterday, we got the ADP Employment Report, which  fell a little short of projections.  High energy costs and supply disruptions caused by Japan’s earthquake are still impacting Factory Orders, though at minus 0.8%  less so than earlier months.

July’s ISM Non-Manufacturing Survey indicated continued growth but at a slower rate. At52.7, it is down from February’s peak of 59.7. Today
Jobless Claims were reported at minus 1,000, and the futures immediately
tanked.

George Brooks

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

Comments

Emerging Growth

Reliq Health Technologies Inc.

Moseda Technologies Inc provides mobile and IT cloud computing to increase operational efficiency and security. It develops SmartFleet, a solution designed for commercial use, as well as SmartCare, a mHealth…

Private Markets

MyForce, Inc.

As parents, we constantly worry about the safety of our loved ones. The media bombards us with incidents from across the nation school shootings, frequent assaults on campuses, and crimes…

WayBetter

The spark hit Jamie when he saw co-workers competing to lose weight. Instead of pizzas and subs, they were eating salads and jogging along the river. Some were sneakily leaving…