Sunday, January 27, 2013

Earnings Appear Good But Some Are Questioning Them


- The move continues with an apparent reacceleration.
- Earnings appear good but some are questioning them.
- Took some gain, otherwise letting the rally ride, but just in case . . .

Impressive action yet again as stocks gained across the board. That early start higher did not turn into selling, or at least not that much selling; stocks dipped in the last 1.5 hours off session highs. A bounce in the last 10 minutes of trade erased much of that loss and indeed the midcaps, small caps, and DJ30 closed out the session at their highs.

SP500 8.14, 0.54%
NASD 19.33, 0.62%
DJ30 70.65, 0.51%
SP400 0.89%
RUTX 0.56%
SOX 1.27%

SP500 just managed to hang onto a move over 1500, but it was a pretty solid move. NASD is still below last week's highs hit as GOOG and AAPL rallied ahead of the AAPL earnings. DJ30, SP400, RUTX, DJ20, and SP500 all moved to even higher PBMH (Post-bear maarket highs). Indeed the move, after a big run already and after getting deep into earnings season, is extending beyond expectations.

Thus, while we did take some gain on some positions that were up but not surging and some that have earnings early next week, we kept most positions running. We looked at them again and again and decided that we were not going to totally start guessing at a market top. Sure it can turn over on Monday and start fileting stocks, but nothing thus far other than the length and size of the run and possible rendevous with history suggests it is running out of gas.

The internals were not that solid as volume fell 2.3% on NYSE and 9.8% on NASD. Breadth was decent on NYSE (1.5:1) but not great. NASD was less at 1.25:1.

Leadership, however, remains strong. AMZN exploded higher ahead of next week's earnings. EBAY jumped up again. SNDK rallied. CMI up, ACAD rallied 5%, QLGC surged (& purged a bit), PII rallied, SRPT looked to have made a definitive upside break as did SWI, DECK exploded higher. APC (energy) surged, GGC (chemicals) surged, TOL (homebuilders) surged.

Perhaps leadership reverses. Given the strength it more likely puts in a test, but we don't want to assume anything. We took some gain, let those running run, and we will keep reasonable stops and take gain at reasonable places. Strong run and we want to let a strong run work for us as long as it will.


Dollar fell hard: 1.3456 vs 1.33.76

Bonds slaughtered: 1.95% versus 1.85%

Oil flat: 95.88, -0.07

Gold finished a tough week lower again: 1657.00, -15.10

The headlines were mostly friendly. PG, KMB, HAL all beat on earnings. The EU showed higher confidence in Germany so the dollar sold. Bonds sold on the notion that the US and world economies are improving.

It would be nice, and perhaps they are. But of course there are lingering doubts:

Bond inflows jumped 8.5B in treasury funds and $2.3B in municipal bond funds. Stock outflows rose to $5.8B the past two weeks. Bonds are selling but flows surge. That selling may not last, but it does appear the market is sensing the Fed might have to throttle back on stimulus and thus the bond decline. If bonds continue to sell that in itself will put the brakes on inflows; investors get their statements and see some rather big drops in their investments and they will flee for their lives.

New Home Sales, December fell 7.3% though prices rose 13.3% year/year.

And what about earnings season? Goldman Sachs shows that while the big name companies are apparently hitting the ball well, many are driving out of bounds.

To wit: Goldman's halftime report for the season shows earnings down 6% from expectations heading into the season. If this holds that is a 1% improvement over Q4 2011 when Europe nosed over in a plunge downward, taking massive coordinated central bank manipulation to avert a total crash. That comparison makes things appear less rosy, but don't tell the market because as of Friday it could care less. It has the notion, and frankly you have to go with what the market believes, that things will get better. Have to love that optimism because . . . it is sure pushing our positions higher.

We are going to look at plays we can make off the earnings moves given we are half way in and some big names have reported good results and made strong moves; we love to play off those if we can. We are also going to look at some 'just in case' plays to the downside in the event the switch is thrown over the weekend and earnings upside turns into selling.

Have a great and blessed weekend.

Stats: +19.33 points (+0.62%) to close at 3149.71
Volume: 1.829B (-9.86%)

Up Volume: 1.37B (+250M)
Down Volume: 529.22M (-381.83M)

A/D and Hi/Lo: Advancers led 1.25 to 1
Previous Session: Advancers led 1.25 to 1

New Highs: 206 (-13)
New Lows: 11 (+2)

Stats: +8.14 points (+0.54%) to close at 1502.96
NYSE Volume: 617M (-2.37%)

A/D and Hi/Lo: Advancers led 1.57 to 1
Previous Session: Advancers led 1.27 to 1

New Highs: 605 (-89)
New Lows: 64 (-1)

Stats: +70.65 points (+0.51%) to close at 13895.98

Support and resistance

NASDAQ: Closed at 3149.71

3171 is the October intraday high
3197 is the September 2012 post-bear market high
3227 is the April 2000 intraday low
3401 is the May 2000 closing low

3134 is the March 2012 post-bear market peak
The 10 day EMA at 3130
3104-3112 from August and mid-October peaks.
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high and the 1/2013 low after gapping higher
The 2011 up trendline at 3062
3062 is the December 2012 prior peak
The 50 day EMA at 3060
3042 from 5/2000 low and several other price points
3024 is the gap point from early May
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
The 200 day SMA at 2993
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows

S&P 500: Closed at 1502.96

1539 from June 2007

1499 from January 2008
The 10 day EMA at 1485
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
The 50 day EMA at 1446
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
The 200 day SMA at 1396
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak

Dow: Closed at 13,895.98

14,022 from 7-07 peak

13,692 from 6-2007 peak
The 10 day EMA at 13,674
13,668 from 12-2007 peak
13662 is the October 2012 intraday high
13,653 is the September 2012 high
13,557 to 13,662
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
The 50 day EMA at 13,341
13,297 is the April 2012, prior post bear market high
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
The 200 day SMA at 13,048
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak

Economic Calendar

January 28 - Monday
Durable Orders, December (8:30): 1.6% expected, 0.8% prior (revised from 0.7%)
Durable Goods -ex transports, December (8:30): 0.0% expected, 1.6% prior
Pending Home Sales, December (10:00): 0.0% expected, 1.7% prior

January 29 - Tuesday
Case-Shiller 20-city, November (9:00): 5.2% expected, 4.3% prior
Consumer Confidence, January (10:00): 65.1 expected, 65.1 prior

January 30 - Wednesday
MBA Mortgage Index, 01/26 (7:00): 7.0% prior
ADP Employment Change, January (8:15): 175K expected, 215K prior
GDP-Adv., Q4 (8:30): 1.0% expected, 3.1% prior
Chain Deflator-Adv., Q4 (8:30): 1.6% expected, 2.7% prior
Crude Inventories, 01/26 (10:30): 2.813M prior
FOMC Rate Decision, January (14:15): 0.25% expected, 0.25% prior

January 31 - Thursday
Challenger Job Cuts, January (7:30): 34.4% prior
Initial Claims, 01/26 (8:30): 345K expected, 330K prior
Continuing Claims, 01/19 (8:30): 3200K expected, 3157K prior
Personal Income, December (8:30): 0.7% expected, 0.6% prior
Personal Spending, December (8:30): 0.3% expected, 0.4% prior
PCE Prices - Core, December (8:30): 0.1% expected, 0.0% prior
Employment Cost Index, Q4 (8:30): 0.5% expected, 0.4% prior
Chicago PMI, January (9:45): 50.5 expected, 48.9 prior (revised from 51.6)
Natural Gas Inventor, 01/26 (10:30): -172 bcf prior

February 1 - Friday
Nonfarm Payrolls, January (8:30): 180K expected, 155K prior
Nonfarm Private Payrolls, January (8:30): 193K expected, 168K prior
Unemployment Rate, January (8:30): 7.7% expected, 7.8% prior
Hourly Earnings, January (8:30): 0.2% expected, 0.3% prior
Average Workweek, January (8:30): 34.5 expected, 34.5 prior
Michigan Sentiment -, January (9:55): 71.4 expected, 71.3 prior
ISM Index, January (10:00): 50.5 expected, 50.7 prior
Construction Spending, December (10:00): 0.5% expected, -0.3% prior
Auto Sales, January (14:00): 5.5M prior
Truck Sales, January (14:00): 6.5M prior

By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

Jon Johnson is the Editor of The Daily at

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