Week’s Economic Reports Could Be The Springboard

Investor’s first read:    Brooksie’s edge before the open

Wednesday, February, 1, 2012

DJIA:  12,632.91          S&P 500: 1312.41

I see little to add to yesterday’s report, so for emphasis will repeat most if again today.

Shows strong gains coming in the future.Today’s Advance  Manufacturing Report bode well for the future.  As noted below, these will are followed by 8 more economic report.

The Stock Trader’s Almanac’s January Barometer is about to make it’s annual appearance as we wrap up trading today’  In a nutshell, the direction of the S&P 500 index in January sets the tone for prices throughout  the year, though “counter” moves are frequent.

So far, the S&P500 is ahead 4.4%, which ranks right up there with past Januarys that were followed by boomers. Since 1960, there have been 7 January’s that posted 4% moves. In neither case was the market down for the year, in fact in all cases, the S&P 500 closed 20% higher on average   The Almanac boasts only six significant errors in 60 years.

With the DJIA at 12,392 on Jan.10, I headlined, “ Odds of a 600 to 1,000-point Surge in the DJIA Improving.

That is still in the cards. While it could rise out of a correction, there is no assurance buyers will wait.

WHY ?

• Tons of cash on sidelines earning nothing and nowhere else to go – except stocks
• U.S. economy gaining traction
• S&P was flat in 2011, yet earnings increased
• Progress, however slight, is being made abroad.
• 2012 is a presidential election year, historically good
• Stocks are cheap.
• This  is 2012  not 2008
• Few investors expect a big surge, after all, look at all our problems

Investors are understandably wary as the week unfolds.  It is a week loaded with economic indicators, which are hoped will confirm the U.S. economic recovery is  on track. Unless Greece  comes up with another roadblock. The direction of least resistance is “UP”.

Europe continues to be the big  drag on progress toward solving European banks liquidity and sovereign debt issues. Greece in particular seems to trump any suit played. Greece plans to complete debt swap talks this week. Prime Minister Lucas Papademos has told Bloomberg News he is, “strongly committed” to reaching a deal.

A headline yesterday indicated home prices  in the US.have stabilized and in fact are declining at a slower rate. This conclusion is drawn from a 10 o’clock Case Shiller report will show property values in 20 cities in Money, posted the smallest decline in 10 months.

Absence of a contribution from the housing sector has obviously reduced the  thrust of our current economic recovery. People need a place to live, especially one in a good neighborhood and school district.  When it becomes apparent that whose houses are being priced up, you’ll comparables pick up as well. (See:Dec 19, “BIG Week : Economic Reports – Watch Housing.”At some point [extremes], this  becomes a common sense issue.

Granted unemployment is still  high and mortgages difficult to, but rentals are nearly as costly asa buying a home BUT, buyers are picking up houses at a historic discount and financing is cheap.  What’s more, a home is so basic to one’s life

This week has the potential to rattle  a lot of cages. Like two drunks swinging wildly outside a bar trying to connect with a solution to Europe’s dilemmas. While solutions seem light years apart, I don’t buy that.  Cover your back, BUT PREPARE FOR OPPORTUNITY.