What Do Institutions Do When S&P 500 Hits an All-Time High?

George Brooks |

The DJIA hit another all-time bull market high yesterday, up all of 5.22 points !! The broad-based S&P 500 hasn’t followed suit, but has only to rise 22 points to beat its October 11, 2007 intraday high.
The hoopla accompanying headlines of new highs is gut wrenching to investors who are flush with cash, and indescribable to those who sat on the sidelines for most of the 2009 – 2013 bull market.

They had good reason to be worried, because this bull market climbed an unprecedented wall of worries in its 133% ascent, but these new all-time highs are getting their attention.
Institutional investors key more on the S&P 500 than they do on the DJIA. It’s based on 500 companies from a cross section of industry groups, the DJIA is based on 30 mature companies. The S&P index is based on the market value (shares x price) of its stocks, the DJIA on price.
What happens when the S&P 500 hits a new all-time high is anyone’s guess. The Street’s computers may be programmed to BUY on a breakout, but they may be programmed to SELL.
Be prepared for both, especially a SELL.
Institutions often act contrarily , selling when others are buying, buying when others are selling.
QUADRUPLE WITHCHING FRIDAY:
That’s tomorrow, and an event when contracts for stock index futures, stock index options, stock options, and single stock futures expire, It happens on the third Friday of March, June, September, and December. Years ago, the squaring of positions accompanying this event caused huge swings in stock prices either way. In recent years, it has been less disruptive.
Support is DJIA 14,417 (S&P 500: 1,550).
BOND BUBBLE:
With money market, T-bill, and CD yields next to nothing, investors rushed to bond funds for a better return. That was a good move when bond prices were rising with interest rates declining. Bigger money sought “safety” in Treasuries with a mix of short- and long-term bonds.
I have been saying this for months, but it is worth saying it again, unless one plans to hold long-term bonds until maturity, there is risk of a sharp drop in their value when interest rates rise in face of global economic recovery. The drop can wipe out years of returns.
Investor’s first read – an edge before the open
DJIA: 14,445.28
S&P 500:1,554.52
Nasdaq Comp.: 3,245.11
Russell 2000: 943.90
Thursday, March 14, 2013 (7:55 a. m.)
APPLE: (AAPL: $428.35) AAPL’s daily performance has been cause for concern since it closed at its low for the day both Tuesday and Wednesday.
The risk of another leg down has been a possibility, but the potential for an announcement about plans for its $137 billion in cash has triggered enough buying to prevent another plunge. At less than 10 times earnings, customer service second to none, and down 39% from its September $705 high, this industry leader should be attracting more buying. If institutions are going to see value here, they will all see it at the same time. That’s when it will finally turn up.
I am not long or short AAPL.
FACEBOOK (FB - $27.08) The selling and steepness of its decline here has accelerated, suggesting lower prices. While support at $26.88 held yesterday, FB needs a very big buyer to prevent a drop to the mid-20s. Resistance to rallies keeps notching down and is now $27.5.
I am not long or short Facebook.
ECONOMY:
This will be a heavy 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.
THURSDAY:
Jobless Claims (8:30)
Producer Price Ix.(8:30)
Current Account (8:30)
FRIDAY:
Consumer Price Ix. (8:30)
Empire State Mfg. Svy.(8:30)
Industrial Production (9:15)
Consumer Sentiment (9:55)
* If I were to be restricted to get one market letter, and one only, it would be InvesTech. Its indicators and interpretation thereof are damn near flawless. www.investech.com (406) 862-777
George Brooks
“Investor’s first read – an edge before the open”
sensiblesleuth@gmail.com
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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.

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Symbol Name Price Change % Volume
MRO Marathon Oil Corporation 15.94 0.76 5.01 28,336,525

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