Until yesterday, there has been a relentless stream of buyers gobbling up stocks at higher and higher prices and especially on the few occasions the market pulled back.
As the U.S. economy gained traction and negatives here and abroad became less daunting, money managers and an increasing number of individual investors were driven to exit cash, bonds, and safe harbors and plunge into equities.
Attempts to correct in late February and 7 days ago couldn’t gain traction – too many buyers.
The only thing that can stop this year’s surge is if the buyers back off, hoping for better prices, or are spooked by a crash in certain commodities and uncertainty about Q1 corporate earnings.
On the plus side, March Housing Starts surged more than expected, jumping 7% to an annual rate of 1.04 million units over a year ago.
Looks like a rebound at the open following yesterday’s 265-point plunge (-1.8%) in the DJIA, worse for the S&P 500 and Nasdaq Comp.(-2.30%) and Russell 2000 (-3.78%).
Initially, I can see a technical bounce to the DJIA 14,724 area (S&P 500: 1,566), followed by volatility.
If the bulls are tenacious as they have been year-to-date, they will take the DJIA back up to DJIA 14,790 (S&P 500: 1,582) today or tomorrow.
Investor’s first read – an edge before the open
S&P 500: 1,552.36
Nasdaq Comp.: 3,216.48
Tuesday, April 16, 2013 (9:14 a. m.)
SEQUESTER: I’m keeping this posted so you don’t forget the market may begin to worry about its impact.
At some point, the question will be raised about the sequester’s impact on the economy, notwithstanding the uncertainty it brings to persons at risk, directly and indirectly.
It is too early to expect anything to show up in the indicators, and it may never be a major issue if our economic recovery gains traction.
It is one of those potential negatives one has to consider along with other ingredients that lead to a decision to buy or sell.
Employers (government or private) may opt to furlough employees without pay, cut back on hours rather than release them to unemployment at the expense of the government. Even so, several weeks without pay has an impact on the economy.
This is one of those uncertainties that, along with a few others, can trigger a consolidation or pullback in the stock market.
Apple (AAPL: $419.85)
AAPL dropped to $419 yesterday. This is critical support, a level that reversed nasty plunges in early March and early April. Prior to yesterday’s 10-point plunge, its stock had a chance to find a base at $419. I am not a big believer in triple bottoms, double bottoms – yes, but my experience has been a third test often fails to hold. This would be an exception, if AAPL gets a huge surge in buying volume as the result of news. A failure of $419 to hold raises the odds of a drop below $400.
I am not long or short AAPL.
FACEBOOK (FB – $26.52)
FB got stopped cold at resistance at $28 Friday, and didn’t have a chance to rebound yesterday as declining issues on Nasdaq outnumbered gainers by an 8 to 1 ratio. Yesterday’s decline turned its pattern to neutral. Support is now $25,30, resistance is $27.88. Between Aug. and Dec. last year, a trading range between$18 and $24 developed. That should provide support for FB and a buying opportunity. That’s where a three month tug of war took place between the believers and non-believers.
I am not long or short Facebook.
This will be a light 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.
Consumer Price Ix.(8:30):
Housing Starts (8:30):
Jobless Claims (8:30):
Bloomberg Consumer Comfort Ix>(9:45):
Philadelphia Fed. Svy(10:00)
Leading Indicators (10:00):
“Investor’s first read – an edge before the open”
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.