WHAT’S ON TAP?
The first week of the stock market’s most notorious month will start with a bang and end with a whimper. Earnings season officially starts on Wednesday afternoon when Alcoa reports, but don’t be fooled – the true start to earnings season is not for another 10 days or so. The noise from the MSM will be deafening and the market reaction should be a snooze fest. The actual earnings calendar is relatively light this week with just 6 S&P 500 companies reporting. None of them should be major market movers. The economic calendar is also relatively light with ISM Services at the beginning of the week and a light calendar the rest of the week.
With the market 5% off its highs we’re at a critical juncture in the rally. Technically, stocks are short-term oversold, but the fundamentals now appear to be fully in question as earnings thus far have been disappointing and housing begins to show further cracks in the foundation. I remain fully in the anti-beta trade, but will update my outlook early this week as I wrap my brain around the upcoming earnings season which is certain to be the next major market catalyst.
Monday -
ISM Non-Mfg Index – 10:00 AM ET
Tuesday -
ICSC-Goldman Store Sales – 7:45 AM ET
Redbook – 8:55 AM ET
Wednesday -
Consumer Credit – 3:00 PM ET
Thursday -
Chain Store Sales
Jobless Claims – 8:30 AM ET
EIA Natural Gas Report – 10:30 AM ET
Friday -
International Trade – 8:30 AM ET
Slow week. Dangerous for longs.
We are very oversold. Market should see a relief rally here.
Oversold?? You gotta be kidding me…we had so many instances of Overbought which turned into Tremendously Overbought and kept going higher.
Anon-
almost any technical indicator is oversold on a daily basis. Don’t be shocked if we bounce a little bit.
I do not know how much the market would rally on positive earnings… I suppose there are less shorts this time around, so going long on earnings season would not be as lucrative as in the 2nd Quarter of 2009.
I do expect better than expected earnings due to lower wages, weak dollar, and no significant increase in commodity prices. Perhaps, a 4th Quarter short position might be a good idea if one is betting on a dollar rally.
I want out of my GBP shorts soon… trade’s too crowded. Long GBP/JPY during earning season?
I am less convinced of the short/medium term bearish view (in bearish, I mean the bear’s wet dream of the S&P 500 below 500.) I doubt the will happen because there are so many people competing for return by looking for “value”, and low interest rates means one can put higher multiples on stocks. Furthermore, I think the market nows as a very strong built in support — too many people are long term bearish, and the ratings for CNBC has plummeted, and bearish websites such as zero-hedge, and seeking alpha are popular. In addition, mutual fund allocation to equity funds are at 44% far below the average of 51% from 1998-2009. Metagame considerations say that bearish views must be more long term bearish than other bearish views. I derive my bearish view from a socialist analysis (although unfortunately, it does NOT yield a contrarian scenario since Austrian analysis always yields similar results, and I must note that the two views are not mutually exclusive although their policy recommendations are.) However, the Austrian right-wing view, is not contrarian as many people embrace it. My case is similar to the one here: http://yaleglobal.yale.edu/content/could-globalization-fail .
You people don’t get it. It isn’t based on which EMA line crosses over the other. The Fed is reducing/ending its quantitative easing via purchasing long term treasuries, this was the fuel for the rally as well as the debasement of the USD. If the fed begins to stop its liquidity fueling debasing dollar policies, then your oversold/overbought indicators don’t mean crap.
Absolutely James. Fundamentals always trump technicals. During a week like this though where there isn’t a whole lot of fundamental news we could see technicals play a more important role than normal….
Hi James, other programs like excess non-bank reserves are deployed liquidity weapons in addition to QE. QE is outright printing. An audit and transparency of the Fed is needed. USD is fundamentally long term risky.
Aki, I agree with you that overall, people really aren’t bullish and they aren’t buying the ‘bull’ that we are recovering. I know very very few people who are confident that their children and grandchildren are going to live in a more prosperous society than they did.
I don’t think this will ever change. I think this crisis and the resulting market volatility has turned many people off from the financial markets and from trusting what the government has said. But do not confuse people not trusting the recovery to people thus fueling a continuation of a rally. The fact is, nobody wants to be short now, even if they don’t believe in the rally. In fact, people still want to go long, even though they don’t believe in the rally. When there are few people taking the short position, then there can’t be much fuel for the fire. And the fact is, the government stimulus programs are ending soon and the Fed’s quantitative easing programs are coming to an end with only a few billion left since the rest are in bonds and (probably) equities.
The biggest bullish sign was when Bernanke said the Fed would buy 1.2 trillion dollars in longer dated treasuries. You didn’t need to know technical analysis, earnings or economic fundamentals to know that was a time to buy because the Fed was going to buy securities if nobody else would.
What are the reasons that their children would live in a more prosperous society? Of course, you said “society” which means a collective group of people not individuals. Do they expect technological advances? That is the only thing I could image that would get us out of this mess although these technological advances cannot yield labor-saving technology; we already have more than enough of that. Instead, technology needs to deal with natural resources, energy, health care, and information processing.
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