DJIM #28 2010
Monday, July 12, 2010 at 07:37AM Just over a week ago the market looked like it would begin earnings season at or near SPX1000, now we enter a week full of bellweathers type announcements (INTC, GOOG IBM JPM GE) thinking 1100 might be the possible scenario instead of SPX1K. In reality, within the markets surge last week were a couple earnings related stories that went pretty unnoticed, but no doubt played a role. These were the pre-announcements noted here from Samsung and STT for critical market sectors. Hopefully, this is a sign of things to come where market downward revisions and growth outlooks won’t be as sombre as earlier predicted. Another sign things might not be so gloomy and that the recent action was just a growth scare, is the fact this Q has had the lowest negative pre-announcements since '06-07. So, we ask if corporations were suffering already from Europe, China etc. and expecting a terrible 2H, why didn’t they pre-announce under the dark clouds overhang brought on by the double dip crowd. They had the perfect time to do so under this ‘growth scare’ and might have been excused you may say, if they had a negative pre-announcement during this time. Only time will tell if this turns out be the 'surprise' indicator for what this season might turn out to be like.
So, we enter the week at the 20MA incredibly, this has been the benchmark for us since the rally started in March 09. The last 2 times we fell beneath this mark, we corrected in Jan and April. On the other side, we’ve have not had the 20ma provide much resistance as the market handily crept back over this MA in Feb for another rally and than in June, a short lived rally of about 50 more SPX points after it was broken to the upside. This is another reason why 1100+ is very possible without market turbulence from earnings. Even though, AA is the earnings Parade Marshall to many, we’d look at CSX as the more crucial report Monday/AMC to watch.
Due to the most uncertainity, we can recall in a long time heading into EPS, we think this will greatly benefit any stock surprising. By this we mean, the gains might be exagerrated as these companies will be rewarded at these depressed prices.