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White Knuckle Time

A spastic rally broke down yesterday as expected at projected resistance and produced a loss for the day.Today: a slight firming in the U.S. stock-index futures suggests a mixed to positive open.

A spastic rally broke down yesterday as expected at projected resistance and produced a loss for the day.

Today: a slight firming in the U.S. stock-index futures suggests a mixed to positive open. Essentially we are in limbo – just a lot of balls up in the air. If we get some breaks as noted below, we are looking at new bull market highs. Otherwise, the market must probe lower where it finds a comfort level that discounts uncertainties and negatives.

Odds favor a further drop, initially to DJIA 12,275 (S&P 500: 1307).

Brooksie’s Daily Stock Market blog: An edge before the market opens.

Wednesday, July 13, 2011 9:24 am EDT

DJIA: 12,446
S&P 500: 1313.64
Nasdaq Comp.: 2781.91
Russell 2000: 829.86

We are bordering on white knuckle time as Wall Street and the world are focused on whether the Congress will find a face-saving way to raise the debt ceiling and avoid default on certain obligations as well as the disastrous consequences that would follow.

Common sense dictates the decision will take us to the edge, but the limit will be raised, at least enough to buy time to work out an acceptable debt reduction plan for the future.

This is pure politics, and unacceptable – a poor, bullheaded way to run Congress, and especially with the global financial picture so precarious.

So far, it appears Wall Street believes a deal will be worked out. I think so too, but I am not sure they “get it.”

If Congress fails, it is possible President Obama can invoke the 14th Amendment which would allow him to override the default.

On Monday, I headlined, “July Could Be a Pivotal Month.”

It isn’t as a rule, but so many negatives could switch to positives in a heartbeat, stocks could blast off.

What’s needed:

The obvious – Debt ceiling increase

Fears of economic slump must prove unjustified in face of economic reports that suggest a temporary softening. We get a bunch of reports this week (see blog 7/12) on Treasury Budget, producer/consumer prices, jobless claims, inventories, New York area business, production and consumer sentiment.

Reasonable stability in the European sovereign debt situation.

Q2 earnings: No ugly surprises, hopefully some unexpected good news.

Recent Headlines :
“Is the Fix In” ? (June 16 – DJIA: 11,897)
“Quadruple Witching Friday –Buying Open Risky” (June 17 DJIA 11,961)
“Ugly ! Nevertheless, the Outlook Can Change Quickly” (June 20 – DJIA 12,004)
“No Time For Napping” – (June 21 DJIA: 12,080)
“No Hope in Sight ? Don’t Bet on IT ! Prepare for Opportunity” – (June 22, DJIA: 12,190)
“Countdown to Opportunity – Start Preparing !” – (June 23 DJIA 12,109)
“ BIG Money Nibbling – Stocks Beginning to Look Attractive – Negatives can Vanish” (June 24 DJIA:
“Institutions Showing Interest – Not Reaching Yet” (June 27 DJIA: 11,934)
“Will Q2 Earnings Reports and Congressional Action on Debt Ceiling” (June 28 DJIA 12,043)
“ Don’t Buy News on Greek Vote – Spike to Be Short-Lived” (June 29 DJIA: 12,188)
“Again: Debt Ceiling Approval and Q2 Earnings Catalysts” (June 30 DJIA: 12,261)
“Enjoy the Fourth ! Prepare for Fireworks in Weeks Following” (July 1 DJIA: 12,414)
“Did Someone Blink ?” (July 5 DJIA 12,582)
“A Pause is Needed Here to Digest Recent Gains, Q2 Earnings Ready to Take Center Stage” (July 6
DJIA 12,569
“Whoa !” (July 8, DJIA: 12,719.49)
“July Could Be a Pivotal Month” (July 11, 2011, DJIA: 12,657
“Watch This One Closely – Very Closely” (July 12, 2011 – DJIA: 12,505)

George Brooks
[email protected]
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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