10k Honeymoon...
Friday, October 16, 2009 at 07:57AM As we discussed yesterday, this is very much a honeymoon phase for those who think Dow 10k somehow brings this magical investment crowd back into the arena. For DJIM and those already in the market, we actually have some concerns and it’s SPX 1100.
We noted INTC/JPM have set the bar on how a corporate reports should be presented. Today, we didn't get such a reaction from GS as the whisper # was missed. AMC action, IBM was getting the cold shoulder as well. GOOG showed accelerating revenue growth and was the only to meet markets current elevated expectations. Still, note all ‘so-called’ disappointments encountered buyers on early weakness which is a good sign.
The idea that it (corporate earning) can't get any better than from those who we've already seen is a realistic proposition. Sure, there'd be small caps and some mid caps that will give out incredible reports, but we have to wait as these come later. In the meantime, in terms of big mega cap stocks that tend to move the broad market, we just don't know if any company can move this mkt through SPX 1100 and beyond. Sure, we'd hope to see it, but we have to also prepare the other side of the outcome. Can this week be the best week from earnings perspective and it's all down hill from here? Well, we’ll now sooner than later. Ok folks, we are not trying to be negative here or pouring cold water onto this market. We are simply calling it to the best of our experience and probability. Everyone loves this market to go forward endlessly, but it isn't always the case. In the next little while, we are actually more eager to hear/see reports from the commodity sector. We feel if the economy is recovering, some of these commodity stocks would be very sensitive when it comes to demand and supply and thus their bottom line. So, it will be an interesting quarter to watch as we have a feeling that we'd see some positive surprise from a few of the well known commods. Aluminum stocks have been added to usual coal, steels etc. this eps season.
Below is a comparison of our sympathy aluminum alert plays RS/ KALU (+7-9%) off AA earnings.
We expected consolidation today and pointed out 2 possible trades to get through the day, one was the probable weakness of casinos (WYNN/LVS) related to Macau and a Crude trade. As far as crude, the breakout to $77.50 led to a big energy rally and definitely played a major role in creeping the SPX closer to 1100.
In mid-small cap land, today was a day to pick up shares on weakness/ low volume. Notably, (ININ TRIT) today & TXIC are plays that won’t be leaving our Shadowlist anytime soon. Also, remember in any weaknes and/or rotation on days ahead, we have stocks like HITK, SXCI, LIFE in defensive areas to trade on those days.