Join        Login             Stock Quote

Stock Market Opening Report - May 8, 2012

 May 08, 2012 07:48 AM

(By Rich Bieglmeier) The stock market seemed unsure on how to act or what to do following political upheaval and rising anti-austerity sentiments in Europe. The indexes started off slightly in the red, moved up mid-day, and essentially closed unchanged.

Volume wise, it was another lackluster day, which is the new-norm in 2012. The Dow barley managed to escape holiday like volume numbers. Wrap it all up, and it was a blah Monday on Wall Street.

The non-action leaves the market in the same technical place we wrote about yesterday, below key support levels with a greater chance for downside than upside. None of our market models improved, and there is nada on the economic calendar until Thursday morning. It's no wonder the day was short on enthusiasm.

[Related -Automating Ourselves To Unemployment]

A lack of volume and buyers following Friday's rout supports our suspicions. Especially after bulls tried to take stocks up, only to be knocked back by sellers.

Without a catalyst, it is hard to imagine bulls getting excited about buying.  That could change with regional Federal Reserve presidents giving speeches across the county and Ben Bernanke speaking via satellite at the 48th Annual Conference on Bank Structure and Competition on Thursday.

Benny and the InkJets recently added job creation to their mission statement. The various speeches will be the first opportunity for central bankers to tell investors what they plan on doing about the 88 million people "out of the workforce."

[Related -Fed: Waiting For June… Or Godot?]

If they hint at more twisting, QE3, or some other form digital dollars, their words could breathe life back into a lethargic market. Short of that, our near-term targets for the indexes remain the same: 2900 for the NASDAQ, 1340 for the S&P, and 12,700 for the Dow.

For now, investors should still focus on protecting against downside, or employ strategies that have worked under difficult market conditions, or shorting stocks for the courageous.

Tuesday's Term of the Day:

Quantitative Easing:

A Federal Reserve monetary policy used to jack up the money supply. The Fed buys securities from institutions or allows them to borrow money at next to nothing as it's a tactic that is usually put in place when interest rates are at rock-bottom.

Financial institutions leverage the "free" cash up and invest in bonds, stocks, commodities… or whatever is hot and keep the difference between interest paid and returns earned.

For example, if a bank like JPMorgan Chase borrows $10 million from the fed at 0.25%, the bank can buy $100 million in AAA bonds yielding 1%. One percent of $100 million is $1 million essentially free dollars. However, they are not limited to bonds.

The desired effect, as Ben Bernanke said, is to target asset prices. By pumping money into the system and allowing leverage, it's the pig through a python theory. You have a lot of money chasing the hot asset classes, creating wealth that's supposed to filter into and strengthen the economy.

Unfortunately, the move devalues the dollar and erodes the purchasing power of savers at the expense of debtors. Most people call it inflation and see its impact at the gas pump and grocery store checkout line.

If you have any questions you would like us to answer, or just want to say hello, shoot me an email at Rich @ wallsttools dot com.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.