Friday, April 16, 2010

Some Light Sell the News Reactions

I am still looking for selloffs on good news as a potential inflection point...

Despite "surprising"* beats by Google (GOOG), General Electric (GE) and Bank of America (BAC) we are not getting a whoosh upward.  It doesn't mean much because the market is up 9 of the past 10 days... it's due for a breather, even if nowadays a breather is a -0.2% day.  With the much anticipated "surprise"* by Apple (AAPL) aka the most loved stock on Earth -  next week, it is doubtful anything serious happens to the downside.

*part and parcel to win investment bank business is to make sure executives look good, so earnings 'surprises' happen most of the time in the market.

The 6 day moving average (the S&P 500 has not closed below this trend line) - a perfect indicator this entire 2 months rally sits at 1203.  Psychological support at S&P 1200 of course.

This environment continues to be great for global corporations (governments handing citizens money to spend, central banks providing easy money, global labor cost arbitrage, lobbyists entrenched in legislative process) - while not so great for small business.  Hence, the dichotomy of the "meh" economy and great corporate profits can continue for a long time.  Until raw material costs rise enough (which has begun) and/or corporations make the mistake of actually hiring people (increasing their costs), it's a bit of a nirvana for profits.  We'll continue to see the largest of the global corporations reporting the next 2 weeks, before moving to smaller names later in the earnings season.

Speaking of constant government priming, we are seeing another $18 billion 'stimulus' passed (they now come every 2-3 months) as another unemployment benefit extension winds its way through D.C..  We just had a $60 billion-ish one pass about 90 days ago.  And they will continue to come.  I'm wondering now if we will extend past 99 weeks the eligibility for unemployment benefits...
  • Just hours after Congress passed a $18-billion bill to restore unemployment benefits for the long-term unemployed, President Barack Obama signed it into law. The bill extends unemployment benefits through 2 June and restores full Medicaid payments to doctors.  The bill cleared both houses of Congress on Thursday night.

With Magical Monday on the horizon, lately traders have been piling into the market in the latter part of Friday positioning themselves for a trade that now works 90%+ of the time.   With the Bernanke Forcefield replacing the Greenspan Put there is no risk aversion, or traders flattening positions ahead of a weekend as they used they pile in.  Ben will protect us all.

Every old school trick to try to find a turning point seems to be flagged - speculative stocks, even the potentially bankrupt rallying, historical ratios, % of stocks over 50 day at records, massive complacency, lack of fear, etc. (I'm sure I've missed 10 others)  But we continue to rally.  Let's see if traders pile in post 2 PM today for the carpet ride Monday.

S&P 1078 remains a hole that needs to be filled...someday.

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