The moral of the story is to ignore what the MSM says about AA and their lead-off report.

When Railroads are not moving goods its a sign of Economic weakness.

When Alcoa is not moving sheet metal its a sign of Economic weakness.

This is the story—that can’t be denied.

Earnings what Earnings–they have an accountant that uses an abacus.

I think we will see a moderate sell-off at some point in Feb as the earnings become fully priced in and investors begin to sell the news. We’re not there yet in my opinion.

It’s an awfully large company to ignore, and a market leader in aluminum. The two things that strike me 1) the price of aluminum went up a lot but their top sales didn’t go up proportionately and 2) the inventory of aluminum is very high and looks like a manic imbalance. I would have a difficult time arguing for a return to sub $5 but I also can’t see the stock going up much. It had its run and it’s over. I happen to believe that the S&P will continue towards just shy of 1200, mainly because there’s so much money that plays the SPY, but most companies will be “Alcoa-like” in that their stocks have performed well for 9 months and the run is over. We will likely tread water until end of Feb and then begin a slow sell off as each confirming bit of news will describe an economy that’s very stuck and very dependent on government money. Do I expect a crash? Not until 2011 or 2012 at the earliest, but I also think that you have to trade the ranges now for the next 18 months or even play intraday scalps. It’s no fun anymore, frankly, but that’s what the government was hoping for: “stabilization” and lots of pressure on money managers to get out of cash. It worked, but it’s totally bogus.

“Of course, the ER isn’t a predictor of specific stocks, but the AA quarter is a microcosm of what we can expect from the entire S&P 500″.

The fact that Alcoa beat earnings last quarter was a pure coincidence with the likely outlook for earnings. Anyone who covers AA earnings knows they are very lumpy, unpredictable and never a great barometer for earnings season. I should never have implied such last quarter.

If I’d wanted to write something really bullish and biased I would have said that AA’s revenues were out of the park and that they now expect 10% growth in China and 5% ex-China which is remarkably bullish. I simply said to ignore them which is the equivalent of taking no position. You’re implying some MSM bullish bias which is not the case.

“… the AA quarter is a microcosm of what we can expect from the entire S&P 500.”