Expect a sharp plunge in stock prices in early trading on the order of 155 -165 points, as a result the Labor Department’s report that employers cut 467,000 jobs in June, well above projections for a cut of 365,000 jobs.

Following an initial shock, the market will rally about 85 points, then tail off this afternoon, as traders, etc. head out for the long weekend.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Thursday, July 2, 2009 9:25 am EDT

DJIA: 8,504.26
S&P 500: 923.33
Nasdaq Comp.: 1845.72
Russell 2000: 517.46

This report, along with a report that wages have stagnated, revives concern that the stock market has run ahead of the economy, ergo, it must find a comfort level that discounts a slower recovery than originally anticipated.

I’ve been down this road here and am not surprised that a recovery will be slow and pained. Why not ?

We got within a hair of a total meltdown in the economy and asset values in 2008 and early 2009, so a robust recovery is illogical.

Can a meltdown still occur ?

Yes, but it is highly unlikely.

Can the economy stink for many months to come ?

Yes … and it will.

Can well timed investments make money for investors and traders ?

Absolutely !

There are a lot of money managers that missed the March lows, it desperately needs to get invested at better prices, and is hoping something cracks the market enough to give them a second chance. If they get that chance, they will be buyers.

If they don't get that chance and the market shakes off these new concerns, they will have to pay-up for stocks.

I am talking trillions of dollars, that they are getting paid to manage and as I have said here umpteen times, they are not getting paid fees to sit on money earning less than 1%. That money will gravitate to a manager who will put it to work.

George Brooks

Expect a mixed market today as institutions take profits in certain winners that they wanted to show in their Q2 month-end report, but for which they see limited upside from here.

Ideally, the market should tail off this morning after a rise at the open with the DJIA dropping below 8,380, the S&P below 916, Nasdaq below 1818, and Russell 2000 below 505 until 2:45 – 3:15, then start to move up, closing up 45 – 65 points for the day.

There is still a lot of cash looking for stocks, so we can get a lot of good action, even though it is not reflected in the market averages.

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

Wednesday, July 1, 2009 9:22 am EDT

DJIA: 8,447.53
S&P 500: 919.32
Nasdaq Comp.: 1835.04
Russell 2000: 508.28

News continues to be less bad, San Francisco Fed chief Janet Yellen said she expects the Fed to keep its benchmark interest rate at zero – 0.25 for “an extended period of time, countering concerns that interest rates were heading higher now that the severity of the recession appears to be ebbing.

The Philadelphia F.R. Bank economic index climbed to minus 2.2, the highest in nine months.

The Institute for Supply Management (ISM) factory index rose to 44.6. While readings below 50 signal contraction, the index is working its way back up.

On a negative note, the ADP Employment Report was worse than expected, however, it may just be indicating a ripple effect from auto industry woes.

Just because economic reports are less worse than those several months ago, is not a green light to bet the ranch. The stock market’s rebounds in November and early March were indications that the BIG money was anticipating these better numbers and bought-in at the low prices.

Economic reports will compare even more favorably going forward, as numbers go up against the worst of the recession Q4 of 2008 and Q1 of 2009.

Expect the same for corporate earnings.

Normally, the BIG money uses the increase in buying prompted by improving reports to take some profits. That tendency will continue, however, I believe a lot of money earmarked for stocks is still on the sidelines and every time an economic report comes out that is less bad than the one before it, and every time the stock market rebounds instead of going lower, investors with cash start climbing the walls.

After getting crushed by the bear market, they cannot afford (so they think) to miss a bull market. If you are one of them, take heart ! Bull markets last for years, and industry groups and stocks rotate between strength and weakness affording investors an opportunity to get on board at reasonable prices. Just be careful NOT to chase a stock after it has had a big run – the temptation is overwhelming !

So much of timely investing is human nature. YOU are often a better indicator of the market’s direction than many of the touted indicators. Fear and Greed.

“No way will I buy today, just look at the news, look at the market, it’s down another 95 points.”
If that’s your thinking, you may be at least close to a trading rally.

“I’m loading up on stocks today, I can’t miss, just look at the good news, maybe I should call my mom and dad and tell them to cash-in those CDs and get in for a big ride.”
If that’s what you are thinking at some point, hold off, don’t load up, and by all means, don’t call mom and dad.

George Brooks

Looks like Institutions are dressing up their portfolios for the quarter ending June 30, wanting to show some of the more exciting names, yet dumping stocks that remind readers that they made bad choices.

Today: Support is 8,500 – resistance is 8,540, which stands to be broken with a move up to the 8,600-8,650 area. However, we have statements by three Federal Reserve officials today which could impact the short-term direction of the market one way or another.

As we approach fall, corporate earnings and economic numbers will begin to compare more favorably with year-ago numbers, adding a more positive tone to the market.

I continue to believe investors should be bullish, but not careless. The news flow favors the bulls by a slight margin, and after what we have been through, that’s a gift. What appears to be unfolding here is news is better than expected in light of the fact the nation (world) came within a heartbeat of imploding only months ago. If that continues, we could get a run on stocks, the reverse of the rudderless plunge in stock prices we experienced in 2008 and early 2009.

In spite of the huge rebound in stocks since March, there are still Trillions of dollars on the sidelines that MUST be invested in stocks. “Must” because investors are paying money managers to buy stocks, not sit on cash reserves earning less than 1%.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Tuesday, June 30, 2009 9:22 am EDT

DJIA: 8529.38
S&P 500: 927.23
Nasdaq Comp.: 1844.06
Russell 2000: 510.61

Modestly upbeat characterized yesterday’s market action. Today’s market kicked off with the Case Shiller report on home prices before the open noting that home prices slipped slightly in April in face of foreclosures. Additionally, there will be the Chicago ISM report at 9:45 on regional business conditions and the Consumer Confidence report at 10:00, and St. Louis Fed’s Jim Bullard comments at noon. After the close Kansas City Fed’s Thomas Hoenig and San Francisco’s Janet Yellen also offer comments.

Some days it is a slow dance for the market, other days it’s a fast dance, and that is what you will be dealing with for many months until the horrors of the 2007 – 2009 bear market in stocks and home prices is a more distant memory.

George Brooks

Traders were buffeted last week, first by the World Bank’s statement that the global recession would be deeper than previously thought, then by the Federal Open Market (FOMC) statement that the pace of economic contraction is slowing.

The DJIA plunged more than 250 points (3.3%) from Friday to Wednesday, before stabilizing in face of the FOMC’s post-meeting statements.

Look for a positive open and a modest up move in early trading in the DJIA and S&P 500 today. But expect selective strength in the secondary stocks, as money managers complete window dressing for the quarter ending June.

Minor support for the DJIA is 8,400. Breaking that calls for a drop to 8,360. A break above 8,500 would pave the way for a move across 8,660.

This week can produce a nifty trading rally, starting in a day or two.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Monday, June 29, 2009 9:23 am EDT

DJIA: 8,438.39
S&P 500: 918.90
Nasdaq Comp.: 1838.22
Russell 2000: 513.22

This is all kind of ho-hum stuff. What we are seeing is a market probing for a comfort level, considering a remote possibility that the recession won’t end as soon as expected (2009) and the flip side that the recovery will be a bit better than expected. Additionally, it reflects profit taking by those who bought in March and April, and angst among those who didn’t.

The stock market is a barometer. As such, it is a discounting mechanism reflecting both fact and expectations.

It is important to bear in mind that there are companies that are well ahead of the curve and will do well regardless of the forecasts or action in the large cap market averages (DJIA, S&P 500).

If we had a guarantee that an economic recovery was getting underway before year-end and that it would be at a minimum modest and slow, you could add 15% to all the market averages.

However, after the ruthless drubbing investors took between October 2007 and early March 2009, it will be a long time before any investor gets too cocksure about a sizzling economy, much less a good one.

Did you pick up a copy of Investor’s Business Daily Saturday morning ? Or do you access www.bigcharts.com or another free chart service ? It would help you follow my posts here, especially the support/resistance levels.

George Brooks

Yesterday’s correction at the open was brief as buyers poured in to buy across-the-board, driving the DJIA, S&P 500, Nasdaq Comp., and Russell 2000 ahead more than 2%.

Today: If the DJIA can drop through minor support at 8,415, it will find meaningful support at 8,375 and rally. I see a reasonable upside target of 8,575 – 8,600 on the next upswing, which has already started and can be extended late today or Monday.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Friday, June 26, 2009 9:24 am EDT

DJIA: 8,472.40
S&P 500: 920.26
Nasdaq Comp.: 1829.54
Russell 2000: 509.18

The big money spoke loud and clear yesterday to say it is a buyer on weakness per a two-week -7% drop in the DJIA. This has happened six times since the March 9 low, but this demonstration of buying interest is more significant than the one in March, two in April and two in May, since it comes at a higher level and at a time there were second thoughts about the market getting ahead of an economic recovery.

Yesterday, I said I expected the market to trade in range of 8,800 to 8,200 throughout the summer. I expect doubts to resurface frequently in the interim causing swings the DJIA and other market averages within their trading range, which I set at: S&P 500 (880 – 955); Nasdaq Comp. (1725 – 1875); and Russell 2000 ( 485 – 530).

I think it would be helpful to focus on two things in this market.
1-A general buy when the DJIA gets down in the 8,200 – 8,300 area and either sell or defer buying when it gets up to 8,750 – 8,800.
2-Be aware that a lot of stocks are marching to their own drumbeat irregardless of what the general market is doing.

This has been a chartists' market since October. Fundamentals were only helpful as the market bottomed in October, November and March in terms of stocks being fundamentally cheap. Tracking earnings and valuations of earnings has been extremely difficult, since we have been in uncharted waters for at least a year.

I believe in tracking both fundamentals and chart action, the latter gaining credibility in that the price action of a stock often reflects the buying or selling of smart money that “knows” what the fundamentals are.

Unless an individual investor has the resources of an institution at his/her disposal or access to that info, fundamental analysis is of limited value in a uncertain market environment like that which we experienced over the last 12 to 18 months.

If you do not use technical analysis (charts, indicators), start studying it. Stan Weinstein wrote a good book on the subject: “Secrets for Profiting in Bull and Bear Markets.”

William O’Neil also: “How to Make Money in Stocks”

There are many others, but these two drill the technical jargon down into an easy to understand format.

There are umpteen “systems” touted for making money in the stock market. Keep it simple and trust me – none are infallible. This is mostly about human nature – exploiting fear and greed at extremes. Charts help pick extremes – minor and major, but it takes skill, patience and absolute control of your emotions to succeed.

Then too, there are always a bunch of balls up in the air, one or more of which can suddenly come down to change the direction of stock prices. Respect the market. Like you would respect a rip tide in the ocean.

George Brooks

Buyers are back, nibbling rather than feasting, but nonetheless, welcome at the table.

Generally positive comments by members of the FOMC and a surprisingly good Durable Goods report helped boost investors’ sentiments.

We are seeing the summer doldrums setting in, which will contain the overall market within a trading range for most of the summer, barring an unexpected economic/monetary jolt or international crisis.

Projected Trading Range

DJIA between 8,200 and 8800
S&P 500 between 880 and 955
Russell 2000 between 485 and 530
Nasdaq Comp. between 1725 and 1875

Selected stocks WILL do well, just not the market in general except rising off the low end of support levels.

Today: Look for a sell off to the DJIA 8,210 area and the Nasdaq Comp. 1775 level. While buying yesterday was broad-based, it was not robust. Let's give the big money a chance to do some calculations based on this week's news and make adjustments to their portfolios for the end of the June quarter.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Thursday, June 25, 2009 9:20 am EDT

DJIA: 8,299.86
S&P 500: 900.94
Nasdaq Comp.: 1792.34
Russell 2000: 494.95

The DJIA was down 23 points yesterday, but the S&P 500, Nasdaq Composite and Russell 200 were all up. While half the 30 Dow stocks declined, two stocks Boeing ( BA ) and United Tech (UTX) accounted for 23 points by themselves (divide the total point change of the two by the Dow divisor (0.132319125).

Advancing issues and up volume outpaced declining issues and down volume by a comfortable margin.

Only two of the 15 Nasdaq stocks that account for 37% of the Nasdaq Composite Index declined (Amgen: AMGN down 17 cts, and Gilead Sciences: GILD down 13 cts). Only 19 of Investor’s Business Daily’s IBD 100 stocks declined. These tend to be the faster growing, sexier stocks, mostly trading on Nasdaq.

George Brooks

The issue currently dominating the stock market is when will the economy start to recover and how robust will that recovery be.

That makes sense, since the market has rebounded sharply from its March lows. If an economic recovery is not strong enough to justify the current level of stock prices, the stock market will seek a “comfort level” where it better reflects expectations.

That’s exactly what the market is doing now. Did Monday’s 200-point plunge reflect someone knew this week’s economic numbers would suggest the economic recovery will be disappointing ? Will comments on the economy by members of the FOMC Wednesday support that conclusion ?

If so, I expect the DJIA to initially drop to the 8,200 area, with a later drop a shade below 8,200, possibly 7,850. If everything this week is a ho-hummer, the DJIA will return to the 8,650 level, then work higher over time.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Wednesday, June 24, 2009 9:25 am EDT

DJIA: 8,322.91
S&P 500: 895.10
Nasdaq Comp.: 1764.92
Russell 2000: 489.77

That’s basic stuff, but even experienced investors tend to overlook the basics at times, especially when they are making money.

Expect investors’ concerns to swing back and forth between optimism and doubts going forward for 6 to 9 months, maybe longer. They went through pure hell for 16 months, saw both home and portfolio values crumble, and will be hearing unfriendly footsteps for a long time.

It would be easy to sink back into a mood of despair so prevalent during the many months stocks declined relentlessly to unthinkable levels.

However, it is important to remember that a lot of time has elapsed and much has been done to pull the economy and asset values out of this unprecedented mess.

The DJIA is still down 42% from its 2007 high, even though it is up 29% from its March low. Yes, I know, that doesn't make sense. Do the math. DJIA 10/11/07 high = 14,280; March 9/09 low = 6440; yesterday's close = 8332.

There are trillions of dollars on the sidelines, much of it earning less than 1%. Where is this money going ? Much of it is handled by money managers who are getting paid to buy stocks.

The CRASH scenario is still in the room, but closer to the exit. Maintain cash reserves of 20%, and don’t hesitate to take quick profits if you get them before others do and pound your stock’s price back to where you bought it. If you are not familiar with Exchange Traded Funds (ETFs) start to study them. They offer a less challenging alternative to buying stocks, which can be more easily impacted by unexpected negative news.

George Brooks

Yesterday’s sharp, but low-volume decline may have been related to Friday’s Quadruple Witching Day. If not, it reflects the concern I referred to that the market has run ahead of an economic recovery expected to begin later this year, or that an economic recovery won’t begin until Q1 of 2010.

I think it will be slow and pained with speed bumps along the way, as remnants of the damage done in the recession and collapse of asset values (home and stocks) between 2007 and 2009 linger.

Nevertheless, most of those problems have been addressed and time eventually heals the wounds, and the BIG money looks ahead to the time when the economy will be revving up a full head of steam and higher stock and house prices WILL be justified.

I believe a lot of investors, big and small, missed the March – June 35% - 50% move in stocks and will be buyers on this drop in stock prices.

DJIA 8,200 looks like the floor to this decline, 880 for the S&P 500, 1720 for the Nasdaq Comp., and 484 for the Russell 2000.

If yesterday’s plunge was solely related to Friday’s option/future expire, we will see the bottom within a day or two and those levels won’t be touched.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Tuesday, June 23, 2009 9:23 am EDT

DJIA: 8,339.01
S&P 500: 893.04
Nasdaq Comp.: 1766.10
Russell 2000: 492.81

As noted yesterday, this will be a big week for economic reports including retail sales, Existing Home Sales, the State Street Confidence Index today; the FOMC economic comments, Durable Goods, New Home Sales, and the EIA Petroleum Status report Wednesday; Jobless Claims, Corporate Profits, and Money Supply on Thursday; Personal Income and Consumer Sentiment on Friday.

If the perception develops that the stock market has run ahead of expectations for an economic recovery, the market will find a new “comfort level” where it discounts new expectations.

All this assumes Monday’s sell off was NOT related to the expiration of futures and options Friday. I have seen this happen on occasion following a Quadruple Witching Friday, but will have to research it to see if there is enough of a consistency to nail it down.

Are you wondering why support levels change frequently ?

They don’t always, just in uncertain markets, marked by the news whipsaw, alternating good and bad news, little of it predictable.

Basically, a support level is a level where buyers can be expected to step in. It may be valid because that’s where buyers stepped in before. Or, when a sharp advance in prices is turned down by profit taking, there is a level where buyers will step in to buy enough to prevent a further decline and turn the market (stock) up again. In a strong market, this can be after a one-third pull back, or it can occur after a one-half or two-thirds pullback in a less robust market. IF, conditions have changed between the present and a past level where buyers stepped in, the latter is invalid. Always ask yourself if conditions have changed when looking back to ascertain a support level.

George Brooks

Look for the DJIA to be down 55 to 95 points by 10 o’clock. If the S&P 500, Nasdaq Comp., and Russell 2000 are up or improving at that time, expect the DJIA to rally.

Friday, I said we have a 65 - 35 shot at a 200-point upmove by Tuesday, and that is still a possibility. The DJIA was down Friday, but the broader based S&P 500, Nasdaq Comp., and Russell 2000 were up.

The big money will be watching the news this week which will feature numerous important economic reports. Support for the DJIA is 8,480, breaking that calls for a test of support at 8,200. In order to get the 200-point move I have referred to, the DJIA must rise above 8,640 in coming days, which would signal investors' approval of the news flow.

Brooksie’s Daily Stock Market blog
-an edge before the market opens

Monday, June 22, 2009 9:27 am EDT

DJIA: 8,539.73
S&P 500: 921.23
Nasdaq Comp: 1827.47
Russell 2000: 512.72

Quadruple witching day came quietly and left without a footprint. Fine ! The quadruple expire happens four times a year, the next one is September 18, a pivotal time of the year. It can be very disruptive.

The Federal Open Market Committee (FOMC) meets tomorrow with its conclusions expected Wednesday at 2:15 pm. No change is expected in the Fed Funds target rate ( zero to 0.25%), however comments about the economy by any one of its 7 members may have an impact on the stock market.

While today’s scheduled news looks like ho-hum, there are some important reports due out this week which should put the market in a wait-and-see mode, in the interim. In addition to the FOMC, we get retail sales, Existing Home Sales, the State Street Investor Confidence Index tomorrow; Durable Goods, New Home Sales, and EIA Petroleum Status report on Wednesday; Jobless Claims, Corporate Profits, and Money Supply on Thursday; Personal Income and Consumer Sentiment on Friday.

Where are we now ?

We have had a huge rebound in the stock market in anticipation of an economic recovery, which according to some may come by Q4 of 2009. Most agree that the recovery will be slow with unemployment remaining high, given the severity of the 2007-2009 recession and collapse in the housing and stock markets.

The BIG question is, has the stock market advanced too much in anticipation of an economic recovery, and we will get the answer in coming weeks as the economic “returns” are counted ?

George Brooks

The DJIA has been turning the corner during the last three days, following a 4.5% correction, which some hoped would continue, enabling them a chance to enter the stock market at lower prices.

If the DJIA sustains a drop below 8,460, they may get their wish.

Today: Doesn’t look like the market is going to grant their wish today, a “quadruple witching day,” when options and futures expire. There is minor resistance to an upside move at DJIA 8,580 and 8,600. “Pre-market activity in the DJIA 30, Nasdaq leaders, and (get ready for this) - bank stocks, indicates a positive open.

I think we have a 65-35 shot at 200 points on the upside by Tuesday, but today must hold most of its gain.

Brooksie’s Daily Stock Market blog
- an edge before the market opens

Friday, June 19, 2009 9: 24 am EDT

DJIA: 8,555.60
S&P 500: 918.37
Nasdaq Comp.: 1807.72
Russell 2000: 509.98

As many of you know, I repeat certain points for emphasis from time to time, like:

1-The $9 trillion of cash on the sidelines somewhat comparable to the entire market value of all listed NYSE stocks. There are still trillions of dollars representing potential buying assuming those who sold stocks to buyers plan to reinvest.

2-A lot of big and little money missed the March - June surge. They will be buyers on dips, especially the money managers who are getting paid to buy stocks, not sit on cash earning less than 1%.

3-We have transitioned from the fear of owning stocks TO the fear of NOT OWNING STOCKS.

4-That fear of standing on the platform watching the train depart creates more angst than a human can endure, leading to the wrenching “I can’t stand it any more” mode where in this case they panic and rush in to buy anything that moves, but especially a stock that has already moved up substantially. Other stupid things they can do are: buy a golf club based on a TV ad, bet on their favorite team to win, buy a “fax-blast” stock, vote against their interests …………..

I have mentioned the possibility of a “buying panic” where investors, fearful of missing the big bull, buy indiscriminately at-the-market, pushing prices up sharply far beyond reason. When the buying exhausts itself , there is nowhere for the market to go but down, locking those investors in with losses, and putting a “lid” on future advances for many months.

Should it happen ? NO !

Will it happen ? Probably not, but be ready for it if it does. Do not participate, rather use it to lighten up with the intent of buying later when prices plunge. I think the DJIA must cross 9,500 before this phenom would occur.

George Brooks