Earnings reports continue to show good bottom-line results relative
to expectations due primarily to massive cost-cutting, but revenue
growth has been anemic at best. The market doesn't much care right
now, and as long as the bottom-line number beats analysts'
expectations we are seeing positive results. Even stocks that have
run up quite a bit the past week such as CAT are jumping on their
numbers. One exception is TXN, which had a solid report but is
seeing a "sell the news" reaction after running straight up since
the
Intel(
INTC -
commentary -
Trade
Now) report last week.
The market has had a remarkable move over the past week, with an
almost parabolic rise. A lot of folks like those on
CNBC's "Fast Money" are giddy with delight, but for market
players looking to make new buys, this market presents quite a
dilemma. Obviously we have very strong momentum, as we have been
going straight up, but that produces extended and overbought charts
that don't invite good entries. In addition, with more major
earnings reports, the potential for a "sell the news" reaction is
increased. It is going to be particularly interesting to see how
AAPL reacts tonight. Expectations are extremely high and the stock
has moved up from about $136 to $153 over the past week as everyone
is looking for blowout numbers.
So do we take our idle cash and dive into this market that has gone
straight up for nine days in a row now? Maybe if we can find stocks
that aren't too extended already. There are some, but they are
tough to find and if they have been lagging the market, you have to
wonder if there is a reason for it.
Even if you are unwilling to pay up for some of these stocks that
have made big moves, that doesn't mean you should be unduly bearish
or aggressively shorting. One of the keys to success in the market
is to not fight the prevailing trend. Markets that are trending
strongly don't quickly or easily reverse. There is always a big
group of folks who have been left behind who are anxious to jump in
on slight pullbacks. That underlying support will only go away
after the market has struggled for a bit and stops making major
gains.
The important thing now is to not get sucked into the euphoria
after the market has already made its move -- don't throw caution
to the wind. If you are going to make some buys, then stay
disciplined and don't just grab something because you are
frustrated with not being more heavily invested over the past
week.
With AAPL earnings tonight and Ben Bernanke testifying before
Congress today, the market is likely to hold steady. With the
number of extended stocks out there, though, new buys are going to
be very difficult.
No positions.
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Rev Shark -
Posted by kurzweg on 21st of Jul 2009 at 09:19 am
Avoid Euphoria and Undue Pessimism Alike
By Rev Shark
RealMoney.com Contributor
7/21/2009 9:11 AM EDT
The Nasdaq has been up nine days in a row for the first time in about 10 years. With a highly anticipated positive earnings report from Apple( AAPL - commentary - Trade Now) tonight and some good earnings from Caterpillar ( CAT - commentary - Trade Now), Freeport-McMoRan ( FCX - commentary - Trade Now), Coke ( KO - commentary - Trade Now) and Texas Instruments ( TXN - commentary - Trade Now) this morning, the quest for a 10th day of gains is off to a good start.
Earnings reports continue to show good bottom-line results relative to expectations due primarily to massive cost-cutting, but revenue growth has been anemic at best. The market doesn't much care right now, and as long as the bottom-line number beats analysts' expectations we are seeing positive results. Even stocks that have run up quite a bit the past week such as CAT are jumping on their numbers. One exception is TXN, which had a solid report but is seeing a "sell the news" reaction after running straight up since the Intel( INTC - commentary - Trade Now) report last week.
The market has had a remarkable move over the past week, with an almost parabolic rise. A lot of folks like those on CNBC's "Fast Money" are giddy with delight, but for market players looking to make new buys, this market presents quite a dilemma. Obviously we have very strong momentum, as we have been going straight up, but that produces extended and overbought charts that don't invite good entries. In addition, with more major earnings reports, the potential for a "sell the news" reaction is increased. It is going to be particularly interesting to see how AAPL reacts tonight. Expectations are extremely high and the stock has moved up from about $136 to $153 over the past week as everyone is looking for blowout numbers.
So do we take our idle cash and dive into this market that has gone straight up for nine days in a row now? Maybe if we can find stocks that aren't too extended already. There are some, but they are tough to find and if they have been lagging the market, you have to wonder if there is a reason for it.
Even if you are unwilling to pay up for some of these stocks that have made big moves, that doesn't mean you should be unduly bearish or aggressively shorting. One of the keys to success in the market is to not fight the prevailing trend. Markets that are trending strongly don't quickly or easily reverse. There is always a big group of folks who have been left behind who are anxious to jump in on slight pullbacks. That underlying support will only go away after the market has struggled for a bit and stops making major gains.
The important thing now is to not get sucked into the euphoria after the market has already made its move -- don't throw caution to the wind. If you are going to make some buys, then stay disciplined and don't just grab something because you are frustrated with not being more heavily invested over the past week.
With AAPL earnings tonight and Ben Bernanke testifying before Congress today, the market is likely to hold steady. With the number of extended stocks out there, though, new buys are going to be very difficult.
No positions.