GCG.A:CAEconomic Data/News
Q4 Earnings Determines Near-Term Direction of Market
George Brooks Follow
| Wednesday, 09 January 2013 01:14 (EST)
Q4 corporate earnings and brokers' projections for 2013 will determine the near-term direction of stocks.
Alcoa (AA), largest U.S. producer of aluminum, was the first major company to report and the results were good enough to buoy some of the spirits on Wall Street.
Q4 earnings for the S&P 500 stocks are expected to come in at an average gain of 2.9%. What the Street is looking for though are surprises that yield a clue for results in 2013.
Good news would run the DJIA up across 13,500, bad news take it below 13,000.
I still believe the major obstacle lies a month or two ahead with Congressional fighting over raising the nation's debt ceiling and slashing spending.
Odds favor an attempt to punch through resistance at DJIA 13,390 (S&P 500: 1,440).
DJIA: 13,328
S&P 500: 1,457.15
Nasdaq Comp.: 3,091.81
Russell 2000: 874.70
Wednesday, January 9, 2013 (9:10 a.m.)
DOW 30 ANALYSIS:
I did a technical analysis of each of the 30 Dow Jones industrial stocks and converted my assessment into the DJIA and concluded near-term risk is 13,260, but the potential near-term upside is 13, 595.
Obviously, I can't analyze 500 S&P stocks, but near-term risk there is 1,445 and near-term upside 1,481.
The nation has a need for an increase in the nation's debt ceiling in order to pay bills already approved and contracted for. Until the summer of 2011, it was a ho-hummer, with 8 approved raises over the last 10 years, 85 over the last 100 years.
However, hostilities in Congress got so ugly in 2011, the DJIA tumbled 12% in7 days following a decision to raise the debt limit. S&P lowered its credit rating for the U.S. government.
I see no reason why we won't get round two in February/March. We reached the debt limit on January 2, but the Treasury has enough wiggle room to buy a couple month's time.
A POSITIVE NOTE:
While I am bearish about the early months of 2013, the year can produce a lot of attractive opportunities, just at lower prices.
The U.S. economy has recovered from the worst recession/bear market since the 1930s. We survived, and that is huge.
Housing is in recovery mode, increasing homeowners' "wealth effect," corporations are flush with cash and hopefully the 113th Congress can resolve key spending issues, setting the stage for a sustainable recovery beyond the current one.
I see an interruption to the bull market in coming months that started in March 2009, but which has not fully run its course. Individual investors are largely absent, but they will return to buy near the end of the bull market when speculation ramps up. That can be a year or two out.
BOND MARKET:
I was premature in my earlier forecast that the long-term bond bubble would burst, but now feel it has already begun with a top traced out between July and December. U.S. Governments were in demand as a refuge from international chaos. As the tensions from European sovereign debt woes abate, money will flow out of safe havens and into stocks where a better return is hoped for. The short-term bonds are obviously not the problem, but long-term bonds are vulnerable.
APPLE (AAPL: $525.31) At a Tipping Point ?
Little change from yesterday. There is persistent selling in the stock , but so far enough buying to prevent a breakdown. This is a big-name stock, known worldwide and it's down 25% from its September high. That's a big discount. If the Street's forecasts are reasonably optimistic, AAPL should be attracting enough buyers to barrel through the persistent selling that the stock seems to encounter every time it attempts to get up a full head of steam. I think we are at the tipping point where it either rebounds sharply across $555, or breaks below $500
I do not own, nor am I short Apple's stock.
FACEBOOK (FB - $29.06): A big seller showed up late Monday and early Tuesday but trading before the open indicates a drop in its price has attracted a buyer. The low 30s are still possible near-term, but only in a neutral/advancing market.
If you have access to a daily chart, this is a good example of what I refer to as resistance. FB has been trying to advance through the $28 - $29 area since early December, and it gave it a good go Friday.
Resistance, also referred to a "overhead supply," is created when buyers hit a wall of selling in a specific area. In FB's case, sellers came from three sources. There were traders who bought it at lower prices, many below $20. And are taking profits. There were investors who bought it in the mid-to-high 30s and woefully saw it drop below $18. Now at $27 - $28, they sell fearing it will go back down, and after all, their loss here is far less than when FB hit bottom at $17.55. Finally, there are IPO investors who were set free to sell after their "lock-up" status expires.
I don't own, nor have I ever owned FB. Generally, I don't recommend or comment on individual stocks. I started covering FB technically after its IPO because on May 21. I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, which it did shortly thereafter. Following a rally back into the 30s, FB dropped into the low 20s where on August 2, I forecast a low of $16.88. On September 4, it hit $17.55, its low since its IPO at $38. I'll continue technical coverage for a while to accommodate readers.
As for Apple, well it is a big-name stock that got shellacked in a short period of time, I wanted to help out targeting a bottom as with FB. I don't have a position in the stock, long or short.
Note: I am going to list the economic reports will not include the numbers from the last report, since those numbers are often revised significantly and therefore potentially misleading.
I suggest you access the website: www.mam.econoday for details reports on this week's calendar and an excellent recap (plus graphs) of last week's reports.
Jobless Claims (8:30)
Wholesale Trade (10:00)
Kansas City Fed Bank President Esther George speaks 12:45p.m.
St.Louis Fed Bank President James Bullard speaks 2:00 p.m.
Minneapolis Fed Bank President Narayana Kocherlakota speaks 8:00p.m.
International Trade (8:30)
Import/Export Prices (8:30)
Treasury Budget (2:00 p.m.)
Phila. Fed Bank President Charles Plosser speaks 9:30 p.m.
*Stock Trader's Almanac: The new one is out – get it !
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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