Market Montage

The past 2 sessions we have had key reports from the likes of Intel (INTC), IBM (IBM), Qualcomm (QCOM) and the like.  The theme is the same – there are warts but with lowered expectations these companies are doing enough to placate investors.  Many of these names were diverging far worse than the market about a week ago when Cummins warned and took many global multinationals down.  Again, on Wall Street the game is set a bar at X and beat it – and the market seems to reward it.  Qualcomm even had an issue with guidance and is being rewarded so you just never know how the market will react.  What we are seeing is a lot of misses on the revenue lines of these companies as revenue is impossible to play games with – whereas EPS is beating.  Anyone who has worked in accounting for a public company, or analyzes these income statements quarter after quarter can see the all the levers that can be pulled to squeeze out an extra penny or three in EPS, especially with these huge conglomerates with operations globally. …

This is one of those reversion sessions – many of the sectors doing little are moving today such as semiconductors and transports.  Intel (INTC) was not that great yesterday but expectations were very low.  This is moving up a host of related names.  I am not sure why exactly some of the global growth names are going but most of these are very broken stocks – see Cummins (CMI) from a few weeks ago.  I think the thesis here is that expectations just have been lowered a lot so maybe the earnings VERSUS expectations wont be so bad.  Outside of that energy stocks are working.

Meanwhile most of the stronger sectors of the past week are sitting or negative – REITs, healthcare, consumer staples, etc.  It continues to be difficult to find a theme that can work week after week.

As for the S&P 500 we are back to this 1370 level – 1340 and 1370 have been key levels all year.   The old highs from early in the month were 1375ish so a break above that should see some capitulation from the short sellers.  But for the past 7 weeks buying a breakout or a breakdown in this market has been the losing trade.

Although it would make little sense in relation to the macro backdrop, the bull case for stocks could take a major advance forward technically in a relatively few S&P points ahead.  As mentioned entering the week, after headfaking down through a support trend line (that connected a series of lows) last Thursday, we are now approaching a similar trend line that connects a series of highs.  To break above that trend line would be positive and it most likely would mean a higher high than the early July levels.  These would be 2 quite bullish developments and a welcome sign after 4 months of slop.   Something like this could be accomplished in 10-12 S&P points from here – an earnings surprise by an Intel (INTC) or the like tonight would help the case. …