What a horrible time for my Internet Service Provider to fail, preventing me from posting a commentary on Friday, a key day.

Yesterday’s action turned out to be a combination of the two themes I have been preaching in recent weeks.

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

Saturday, February 6, 2010 11:05 am EST

DJIA: 10,012.23
S&P 500: 1066.19
Nasdaq Comp.: 2141.12
Russell 2000: 592.98

1)Since January 25, I have targeted 9,895 as a “reasonable risk” area for the DJIA to drop to in this correction, and 9,510 as a “maximum” risk level. Yesterday it hit 9,822 before rebounding to close fractionally on the upside. I set the S&P500’s “reasonable and maximum” risk levels at 1055 and 1035, respectively. It rebounded yesterday at 1045.

2)Concurrently, I have been emphasizing that the “Ball’s in the Institutional Investors’ Court,” explaining that with no attractive alternative to investing in stocks, money managers stand to use this pullback as an opportunity to invest the trillions of dollars they are estimated to hold for clients.

An unexpected drop in the unemployment rate to 9.7% in January (vs projected rate of 10%), startled the Street when reported at 8:30 am Friday. But buyers were not able to stem a spillover of selling from 268-point drop in the DJIA Thursday until mid-afternoon when the markets rallied. That may be revised, but stands for now.

We now have what technicians call a “one-day reversal,” to the upside, a fairly significant sign, especially since it came with the market averages entering “oversold” territory. I’d have to view this positively, in line with my belief that 2010 will be choppy, but provide several buying opportunities for investors with good timing.

I have a keen respect for fundamental analysis, and apply it regularly. But don’t listen to that crap about “no one can time the market.” Poor timing not only reduces potential gains, it magnifies potential losses. What they are telling you is that “they” can’t time the market. Granted it has its error factor, but it is essential for successful investing.

Week of February 8:

Fed Chief Bernanke is scheduled to testify before the House Financial Services Committee Monday, Feb. 10 about the Fed’s plans withdraw emergency stimulus from the economy. S. Louis Fed Res. Bank’s’ James Bullard said Friday, the U.S. economic recovery is “on track” and that he expects job growth in coming months. Kansas City Fed Res. Bank chief Thomas Hoenig concurred, noting he expects a modest but consistent recovery in employment and economic growth of 3.25%.

I’d like to see what is happening before the market opens Monday, so I may post again, assuming my ISP doesn’t have other plans !

Initially, it looks like the DJIA runs into resistance at 10,150, and the S&P500 at 1084. A test of Friday’s lows MAY be in the offing today (Monday) at DJIA 9,900 and S&P500: 1050.

Let’s see what the pre-market trading and overall environment is before the open Monday.

George Brooks

Jobless claims up, a disappointment and pressure at the open, threatening to take the market averages below the levels I noted yesterday, as putting this week's two-day rebound “at risk.”

Those levels were:

DJIA: 10,210
S&P500:1092
Nasdaq Comp.: 2175
Russell 2000: 609

The market averages are - early stage oversold, meaning we are close to a technical bounce, but more consolidation may be needed before buyers overwhelm sellers. It’s really up to the institutions at this point.

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

Thursday, February 4, 2010

DJIA: 10270.55
S&P 500: 1097.28
Nasdaq Comp.: 2190.91
Russell 2000: 610.66

Yesterday, I said “Tuesday’s market action mirrored Monday’s – upbeat, but not the kind of bullish intensity that triggers wholesale buying. Tentative, but positive.” Tuesday’s blog headlined, “Ball’s in the institutional Investors’ Court.”

Yesterday, I also said that “Odds slightly favor a breakthrough, but possibly interrupted by an intraday correction, which would give us a read on how anxious institutions are to buy, should they use it to pile on.” I headlined that blog, “Buyers Hovering.”

That is where we are today. If they see this as an opportunity to put cash to work for their clients, the market will reverse sharply to the upside. Otherwise, 2010’s decline has further to go.

Tomorrow’s 8:30 am, “Employment Situation” report will be important. A good one could be the trigger to a leg up, but a bad one would roil the markets.

George Brooks

Yesterday's market action mirrored Monday's - upbeat, but not the kind of bullish intensity that triggers wholesale buying. Tentative, but positive.

Buyers seem to be tiptoeing through minor resistance levels, but are just now approaching more serious potential selling, namely DJIA:10,350 - 10,370 ; S&P 500: 1109 – 1114; Nasdaq Comp.: 2208 – 2210; Russell 2000: 617 – 619. Odds slightly favor a breakthrough, but possibly interrupted by an intraday correction, which would give us a read on how anxious institutions are to buy, should they use it to pile in.

This two-day rebound would be at risk with a drop below - DJIA: 10,210; S&P: 1092; Nasdaq Comp.: 2175; Russell 2000: 609

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

Wednesday, February 3, 2010 9:23 am EST

DJIA: 10,296.85
S&P 500: 1103.31
Nasdaq Comp.: 2190.06
Russell 2000: 614.05

Impressive ! While not conclusive, it’s second and short for the bulls.

I can’t think of a better mental/analytical exercise than to suggest you think like a money manager, getting paid to work money, but not having an attractive alternative than to buy stocks.

If there was $9 trillion on the sidelines a year ago, there’s still close to that today. Where else could it go ? T-Bills at less than one-half of one percent ?

Unless a manager can justify waiting for lower prices, he/she has to buy stocks, which depending on who you ask are cheap, or dear.

We didn’t just come out of a recession, as usual. We came out of the worst in 75 years. Does the recovery have legs ? Can a manager risk buying only to see a nasty downdraft in the market produce paper losses in portfolios ? Can the manager, cool it on the sidelines only to see stocks run.

Who were the sellers in recent weeks ? Right along, I have attributed it to investors taking profits in 2010, rather than tax-year 2009. There had to be some fat gains as a result of last year’s surge. Then too, some selling had to be by investors who rode out the bear market, saw portfolios regain a large percentage of 2008 – 2009’s paper losses, and wanted to lighten up at higher levels, than at lower levels.

That leaves investors who believe stock prices will tank in 2010. Mohamed A. El-Erian, CEO of Pacific Investment Management ( $1 trillion under management ) expects lower stock prices this year. “ Judging from market valuations, I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” he wrote in a Bloomberg News column, adding, “Investors have wrongly priced in an orderly withdrawal of stimulus measures , a rebound in bank lending, and coordinated government policy the restore growth.”

Glass half full - half empty Mr El-Erian ?

George Brooks

Yesterday, I said we should give the market another day or two to conclude whether we are still in a “technical” correction, or whether Friday’s good GDP report ( and Monday’s ISM report ) would trigger enough institutional buying to turn the market around.

Yesterday’s market action was impressive, but not conclusive. At this point, it’s up to the institutions. What do they want ? An economic recovery absent of continued government stimulus and the kind of higher interest rates that accompany a recovery, or a weak economy with government stimulus in place ?

Is this the pullback in stock prices they were looking for ? Can they afford to watch the market run away from them as other institutions gobble up the stocks they have targeted ?

Today: Technically, yesterday’s low-volume rebound was fragile. The DJIA has resistance starting at 10,240 ( S&P 500: 1094 ). A surge of institutional buying can blow through that resistance with ease, but volume must accelerate.

The four major market averages noted below have traced out early-stage-rebound patterns that are capable of supporting a turn, which prompted my headline yesterday, “Heads Up ! Opportunity Developing.” These “turning” patterns could do more work down here, before a meaningful rally. A plunge below DJIA 10,000 (S&P 500: 1072) is 50-50.

The ball is in the institutions’ court. If they scramble, we are off and running. If they sit it out, look for lower prices.

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

Tuesday, February 2, 2010 9:24 am EST

DJIA: 10,185.53
S&P 500: 1089.18
Nasdaq Comp.: 2171.20
Russell 2000: 609.25

The market opened strong yesterday in expectation of a good ISM Manufacturing report. The report, a survey of 300 manufacturers encompassing employment, production, new orders, supplier deliveries, and inventories, didn’t disappoint, exceeding estimates by a wide margin, climbing 5.2% to 58.4. A reading above 50 signals expansion.

Consumer spending in December rose for the third straight month.

The Pending Home Sales Index will be out at 10 am. Developed by the Nat’l Association of Realtors, this index addresses “existing,” not new home sales and is viewed as a leading indicator of housing activity.

That’s all recent history. The institutional focus will be what are these numbers going to be a year, 18 months from now ? Substantially higher ? They'll BUY.

George Brooks

A bounce at the open ahead of ISM Manufacturing report, which the Street is hoping will post its 6th straight increase. ( 10 o’clock). I suspect the market will sell off after the report with the DJIA breaking 10,000 and S&P 500 breaking 1072.

We should give the market another day or two to conclude whether we are still in “technical” correction. At this point, it doesn’t appear Friday’s GDP surprise was enough to trigger strong enough institutional buying to turn the market.

Resistance is DJIA: 10,145 and S&P 500: 1082.

A surge beyond DJIA 10,330 and S&P500 1105 would strongly signal a reversal.

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

Monday, February 1, 2010 9:24 am EST

DJIA: 10,067.33
S&P 500: 1073.87
Nasdaq Comp.: 2192.35
Russell 2000: 602.04

However, you will often find there is a delayed reaction to news in the market ( as well as in stocks ), since the institutional decision process can take several days for committees to meet, analysts and money managers to crunch numbers, and computers to re-calculate the new data. One concern these people have is that GDP numbers are often revised down in the future, discouraging big decisions based on “current” reports.

The downside of good GDP numbers is the Street will begin to sweat the prospect of the government withdrawing emergency economic stimulus programs with the prospect of higher interest rates. This is happening in China now.

I think the market is telling us it needs to find a level where those concerns are fully discounted.

January Barometer:

It was less than two weeks ago it appeared January was headed for a gain and the prospect for a good year in the market. But recent weakness in the market erased January’s early gains and we ended up with a loss of 3.7% for the S&P500.*

While the January Barometer (JB ) sports a stellar record (91% accurate within reason) for forecasting the general tone for the stock market during the ensuing year, it is not infallible – good, but not perfect.

The JB’s decline does not alter my expectation for the year, which is for a market characterized by choppy trading, and several very juicy buying opportunities. Political ugliness will share headlines with concerns that an extended economic recovery would trigger inflationary pressures and a less accommodative government policies.

Seems as if as much as people want a strong recovery, they fear it, as well. The news headlines and guru pontifications are mixed, with forecasts of doom on the one hand and forecasts of a better-than-expected recovery on the other.

Bloomberg.com quotes Deutsche Bank Securities’ chief economist as saying, “The groundwork has been laid for a very powerful recovery in capital spending. It won’t take much of a spark to get companies to start spending and hiring.” Bloomberg also notes that Morgan Stanley’s January business index found that 34% of companies plan to increase hiring, up from 8% in August. Its co-head of global economics, Richard Berner, was quoted as saying, "Rising jobs will provide the gains in income and confidence needed to support consumer spending."

If these guys are right, what can we expect money managers to do with their trillions of dollars ? Can they afford to wait for a big crunch to load up, or will they use weakness to buy ?

George Brooks

*The S&P 500 has been more reliable as a measure of stock market behavior for tracking the January Barometer

What could turn this market around ?

How about a surprisingly good Q4 GDP report (+5.7%), which beats most projections handily.

Over the past week, I have felt the market would have to reach a level where some of the managers of the trillions of dollars on the sidelines would say, “ENOUGH !, this is the opportunity I hoped would come to let me in at lower prices - I’m buying.”

I expected that would occur a shade below DJIA 9,900, worst case 9,500.

However, the big question now is, does the GDP report trump a technical correction, prompting money managers to scramble to buy stocks before another big hitter runs their prices up ?

Today: Look for a strong open, up 85 – 110 points by 10 o’clock ( S&P 1098), some pullback in late morning/early afternoon, then mixed at the close. If the GDP report does not attract institutions this time around, we will get a rally failure, which would result in a break below DJIA 10,000 (S&P 500: 1072).

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

Friday, January 29, 2010

DJIA: 10,120.46
S&P 500: 1084.53
Nasdaq Comp.: 2179.00
Russell 2000: 607.93

It really depends on whether the institutions panic and charge in. Had we gotten a ho-hum GDP report. I have no doubt we’d see lower prices. You have to put yourself in the shoes of these money managers with trillions of dollars to invest. They cannot hold out for lower prices if their peers begin to run the table again.

Let’s say you are running a lot of money, have tons of cash, and have been salivating at a declining market, because you will get a chance to buy-in at better prices, just so long as no one breaks ranks and buys the stocks you have targeted.

You look up and down the line and there’s Carl he’s not buying, Jimmy is not buying, neither is Tom. But, Robert is, and there comes Peter, Sam, and George. They’re not waiting for lower prices, and now the stocks I want to own are running away from me, just like last year ! I better get busy !

Last Friday, I picked Dow 9,895 as a reasonable “technical” downside “risk” level for the DJIA, and 9,510 as a maximum risk under current conditions. I based it on a technical analysis of each of the 30 Dow industrials, after which I converted that data into the DJIA itself. Not infallible, but often very helpful in looking beneath the DJIA itself. I couldn’t do this exercise with the S&P, since it would involve visually studying 500 stocks. What’s more the S&P is Market-value based, the Dow price-based. The Dow’s “divisor” is published, the S&P not.

For those tracking the S&P 500, reasonable and maximum risk levels based on current conditions would be 1055 and 1035 respectively.

Like I said above, the GDP report may prompt institutions to move in.

What could go wrong, short of an international financial crisis, Mideast blowup, or US bank failure, and a boring Super Bowl ?

While Wall Street has worried off-and-on about the government’s inevitable withdrawal from economic life support policies, the concern of the aftermath may not be fully discounted. Let’s say stock prices have discounted that event and sell at reasonable price levels going forward, but maybe the Street has to experience a little more angst before moving into stocks aggressively.

Remember, a good part of these mood swings in the market reflect human nature, something that cannot be quantified. I’ve been down this road before on how significant human nature is in this casino, but it is worth mentioning again and again, because it is as big a driver of stock prices as anything. Sensing emotional extremes is what enables the flow of stocks and money from weak hands into strong hands.

OK, let’s say the Fed decides to raise interest rates from near zero to a smidge above zero. Just the anticipation of that event would jolt the stock market and roil the bond markets. But why would the Fed do that, other than in response to an improving economy, and the last time I checked, isn’t that what everyone, including Massachusetts voters, want ?

George Brooks

Congress got a well-deserved spanking last night. A confident, humble, but forceful President chided BOTH sides of the aisle for inaction and unyielding partisanship. Stock markets in Asia and Europe responded with buying.

Many of yesterday’s charts traced out one-day reversal patterns, suggesting the correction is over. While we may get an 85 to 110 point rally in early trading, I still think the market is in a technical correction, which could take the DJIA down a shade under 9,900, or even to the 9,510.

The market needs to find a comfort level, and that involves probing downward until buyers override sellers.

While the impact of what President Obama said may not be reflected in the stock market beyond an initial rally, it will be once the market turns the corner from this correction and in months (years) to come.

His speech, as well as the Jobless Claims and Durable Goods report (8:30 am) will be priced-in to the opening prices.

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

Thursday, January 28, 2010 8:24 am EST

DJIA: 10,236.16
S&P 500: 1097.50
Nasdaq Comp.: 2221.41
Russell 2000: 618.38

The market sold off early Wednesday following the New Home Sales report. The Street was expecting a modest gain, but got a 7.6% decline. The drop was attributed to the expire/extension of the home buyers’ $8,000 tax credit. Monthly data is volatile and subject to revision (Nov. revised up), and not generally believed to be highly reliable on a month-to-month basis. Nevertheless, it was down, not up – a negative.

The market rebounded late afternoon following the FOMC’s announcement that the nation’s economy has “continued to strengthen,” but conditions warrant low interest rates for an extended period of time.

Money managers with a lot of cash, and no attractive alternative but to buy stocks may hope for significantly lower prices before stepping in. However, it would only take a few big managers to break ranks and buy in size to bring others in aggressively.

The market is in limbo right now, between a “thank God we didn’t crash” celebration and a sobering up phase, where we face the harsh reality of a gradual, irregular recovery.

It’s possible the President’s speech, new initiatives , and pressure to jolt Congress out of its pre-school bickering will turn the market here. I’m opting, though, for the technical correction to run its course.

This post will be released an hour before the open, therefore any developments in the interim will not be factored in, including Durable Goods and Jobless Claims.

George Brooks

As expected, the market rallied after a brief selloff, then ran into a wall, between DJIA 10,250 and 10,295, before erasing its gain for the day.

Whatever strength the market was able to muster as a result of a better-than-expected Consumer Confidence report, a sustained upmove was not in the offing, confirming my belief this is a “technical” correction that will just have to run its course.

While some indicators are beginning to suggest an oversold condition, I think we can see lower prices before a meaningful rebound. Nevertheless, let me remind you again, there are trillions of dollars in the hands of money managers, many of whom have been waiting for a decline in prices to buy.

How much further must the market drop before they make the plunge ? I believe a lot of the weakness over the past week has NOT been based on concern for the economy or a particular company’s prospects, but simply a desire to lock in a fat profit in 2009’s big winners in a new tax year. Now those sellers have cash to invest, and don’t think for a moment they aren’t going to want to start making money again.

I think we have a shot at a decline below DJIA 9,850. Depending on what news hits it when it gets there, I can see 9,510.

By all means, know what you want to buy, and the price level you want to buy it. Depending on the news flow and mounting “fever,” the market can turn on a dime.

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

Wednesday, January 27, 2010 9:18 am EST

DJIA: 10,194.29
S&P 500: 1092.17
Nasdaq Comp.: 2203.73
Russell 2000: 612.16

A break below DJIA 10,000 is very possible. Be assured the financial press will make a big deal of it. It’s a round number that looks good in headlines, other than that, it has little significance.

Nevertheless, a break below a much publicized level would most likely trigger additional frenzied selling and present a great buying opportunity several hundred points lower. It could all be over in a couple days.

The world-is-coming-to-an-end doomsters would scream, “I told you so,” taking care to avoid mentioning that they missed the first leg of a bull market, a 70% + surge in the market in less than 11 months.

New Home Sales will come at 10 o’clock. Most likely the plunge in November sales were influenced by the expire/extension of the tax credit for homebuyers. December may show a slight improvement. Another sharp drop would impact the stock market, suggesting more woes for the housing industry, and another increase in inventories on the market.

Expect news out of the Federal Open Market Committee meeting at 2:15 pm. With the President’s State of the Union address tonight, I doubt anyone at the Fed will have much to say today.

This will be a very important speech for President Obama, expect the announcement of initiatives addressing jobs and government spending. As I understand it, only one-third of the $787 billion stimulus package has been spent to-date. I would expect to see a number of infrastructure programs to be part of the administration’s plans for 2010. Infrastructure spending is a natural, and the administration may have withheld a portion of the stimulus money rather than spend it all immediately.

Today: Looks like a “wait and see” day, with the State of the Union address tonight. Probably another attempt to surpass resistance starting at 10,250. A bad New Home Sales report would trigger a continued slide. A surprisingly good one, a 100-point pop.

I don’t think a sustainable rebound will occur as a result of news about the economy, or the State of the Union address. The market will rebound when it is “technically” ready, when buyers simply overrun sellers and drive prices up. Granted, the press will attribute the turn to a piece of news that coincided with the turn, but this is all about money-in and money-out. The “money out” investors are calling the shots right now – for the time being !

George Brooks

While there has been concern about Bernanke’s confirmation, Obama’s policy on big banks, China’s economic policies, etc., what we are dealing with here is a “technical” shakeout, which must simply run its course as the market probes for a comfort level. .

That could come in the form of a sharp one - or two-day reversal, following a sharp plunge, or come in the form of a more gradual, choppy turning pattern. I favor the former.

Today: Lower at the open, down 55 to 65 by 10’oclock. Maybe a rally from there, but lower by the end of the day, off as much as 85 to 125 at the close.

DJIA 10,250 offers initial resistance to any attempt on the upside - 10, 295 would be even more formidable near-term. Start preparing your buy list, and price levels where you want to buy them, just per chance we get an abrupt selloff below DJIA 9,890, projected in Friday's blog.

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

Tuesday January 26, 2010 9:23 am EST

DJIA: 10.196.86
S&P 500: 1096.78
Nasdaq Comp.: 2210.80
Russell 2000: 618.11

Big news week, starting with ICSC-Goldman retail store sales, Redbook (store ) sales, and S&P Case-Shiller HPI ( home prices), all by 9 o’clock. The Federal Open Market Committee (FOMC) meets today, so we will get commentary on monetary policy from its members today and tomorrow. Consumer Confidence will be reported at 10 o’clock, as will be the FHFA Home Price Index. President Obama gives his State of the Union address tomorrow night followed by a lot of political spin both ways. Bernanke’s confirmation is expected by week’s end, though it’s pretty much a done deal.

A lot of good money was made between March 2009 and early January, and normal profit taking in tax-year 2010 accelerated when investors saw profits shrinking as the market declined.

Additionally, I believe there was selling by investors who rode out the bear market, endured seeing huge paper losses in the process, then did some selling when they saw their portfolio values recover, unwilling to risk another selloff.

There is a lot of institutional cash that is looking for stocks; I am expecting it to work its way into the market on weakness.

George Brooks

I continue to view the 537-point ( 5% ) three-day drop in the DJIA as “technical.” Initially, the market was able to absorb profit taking in 2009’s big winners, but concern for President Obama’s hard-nosed position on the nation’s big bankers and concern that Fed chief Bernanke won’t gain approval for a second term turned a normal correction into a minor rout.

I believe investors who decided to take profits in the tax year 2010 panicked when they saw their paper profits shrink, and dumped aggressively.

If Bernanke made mistakes before the near meltdown in the financial community, I think he has made up for them in the interim. Replacement of Bernanke at this time would upset global confidence and roil markets, probably good for a 1,000 – 1,200 point drop in the DJIA.

Today: a rally at the open, perhaps up 85 points in the DJIA by 10 o’clock. The market is getting oversold, but I don’t expect a chance of any meaningful rebound until Friday or the following Monday.

“Hit-‘n-run traders who used Friday’s weakness to buy, can use this morning’s rebound to clip a profit.

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

Monday, January 25, 2010 9:25 am EST

DJIA: 10,172.98
S&P 500: 1091.76
Nasdaq Comp.: 2205.29
Russell 2000: 617.12

The sudden plunge seemed to have caught an increasingly complacent investor off guard.*

Their complacency was confirmed Friday when Reuters News reported the results of a recent Reuters/University of Michigan survey, proclaiming, “Investor optimism was at the highest level in two years.”

Contrarians consider extremes in optimism and pessimism as an alert to overvaluation or undervaluation in the market, the rationale being that investors tend to get most enthusiastic at tops and most pessimistic at bottoms.

So what about the trillions of dollars earmarked for common stocks I have referred to repeatedly in recent months ?

As I see it, until there is a better alternative to stocks, than T-bills and CDs yielding less than 1%, the preference will be stocks, barring some unexpected adversity, such as an international crisis, bank insolvency, plunge in the economy.

So, what about the January Barometer (JB ) ?

Simply stated, as January goes, so goes the general tone of the market throughout the year, corrections notwithstanding.

Well, by January 19, the S&P was up 3.2% giving bulls hope for a good year, but by Friday’s close, it was down 2.1% to-date, suggesting trouble if the market doesn’t rebound beyond the Dec. 31 close of 1115.16.

Worth noting, however, the JB’s accuracy in midterm election years tends to be less reliable, owing to the magnitude of political infighting. That is not upsetting, I have expected a choppy year, anyhow, however one with some juicy buying opportunities.

My December blog touched on both the bullish and bearish case for the market and analyzed the 30 Dow Jones industrial stocks to arrive at a reasonable downside risk and a maximum downside risk. I totaled the projected prices, and divided that sum by the Dow “divisor” to get the same risk levels for the DJIA itself, concluding the reasonable risk was 9,760, and maximum risk was 9,430.

This exercise was especially valuable when I did it last February before the bear market bottom, when I estimated a reasonable risk for the DJIA was 6,600 and maximum risk was 6,250. The March 9 intraday low was 6440.08.

I ran the same technical analysis over the weekend and concluded that ( barring major new negatives ) a REASONABLE DOWNSIDE RISK now is to DJIA 9,895, and a maximum risk to DJIA 9,510.

Right now we have a few balls of uncertainty up in the air, causing some investors to accelerate their profit taking in 2009 winners, and other investors to raise cash “to the sleeping level.”

Economically, I don’t think the market should focus too much on unemployment; it’s a lagging indicator. What’s more, corporate America will endeavor to enjoy the profitability that comes with a smaller workforce at least until they must increase it to meet demand and be competitive.

Realistically, this level of unemployment pales compared to the 20% to 30% unemployment we would have had, if the Fed, Treasury, and administration failed to prevent a total meltdown last year.

One thing to always keep in mind as a declining market approaches a level where it should get technical and fundamental support. If correctly selected, that SUPPORT LEVEL IS ONLY VALID AS LONG AS NO NEW NEGATIVES SURFACE.

*Jan. 15 blog: “There is an air of complacency out there that makes me nervous enough to step back, tap the dirt off my cleats and look for new leaders.”

George Brooks