Show me the earnings! We wrapped up yet another relatively quiet week with fresh new rally high's for DOW, COMP and SPX. Some people claim that this rally has not gotten the kind of respect it deserves. Well, we'll know soon enough how much respect is being baked into the current rally when the earning season starts in the coming week.
In general, people tend to be optimistic as far as the stock market is concerned. What we witnessed over the last few weeks is the slow acceptance that things are improving. The stability of the Economic trends and the positive outlooks provided by corporations from time to time give investors a very strong reason to hold on to their current assets. In reality, we probably have pursued more people to invest back into this market after an absence of a couple of years. Even though the risk is always there that the Economic recovery doesn't go as smooth as expected at some point down the road, but at this point, most people have accepted it as a non factor. On the other hand, there's really nothing else that's earning anyone any return besides the equity market. Real estate still has problems and the different forms of treasury just do not provide the kind of attractive return we've been seeing from the stock market. What makes things more interesting is that even the "household" stocks have been performing as well. It's definitely a confidence issue and we can imagine people discuss their investment portfolio with their friends/family and they probably all have one conclusion in common, things(stocks) are getting better. You have to understand, traders only represent a small fraction of the pie out there. Most of the investors and funds invest for long term and sentiment is very important to them. For most people, when they realize that the crisis is truly behind us and stocks have been moving up, it's enough for them to step back into the market. Technical levels are really only important to those who trade this market on a short term basis.
Okay, earning season is upon us and we have just updated our shadowlist. We definitely had some excellent EPS plays and expect many to deliver some good, if not spectacular results once again this quarter. After all, some plays do need some good results to justify their current valuations. On the other hand, just like in the past, we'd be keeping our eyes on any fresh or old names to resurface on great results/outlook. Bottom line, we'll have a few busy weeks coming up and it's important to keep our minds focused and fresh cash on hand.