Yesterday's disconnect: noise or a sign?
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

    The International Council of Shopping Centers reported weekly sales of major retailers rose 0.2% versus the prior week and 2.8% versus the comparable period in 2008; Redbook Research reported month to date retail chain store sales up 0.5% on a year over year basis.
   
   Other

    More discussion on the dollar (long):
    http://www.poorandstupid.com/2009_10_18_chronArchive.asp#8365307403585034543

Here is a must read speech from David Einhorn on the risks to our economy (long):
    http://www.realclearmarkets.com/blog/einhorn-vic-2009-speech.pdf

Politics

  Domestic

This is scary (4 minutes on the climate control treaty):   
http://www.youtube.com/watch?v=PMe5dOgbu40
However, please remember that for any treaty to become effective, it has to be ratified by the Senate.

    And this (medium):
    http://online.wsj.com/article/SB10001424052748704500604574482191245495128.html

    Volcher’s solution to ‘too big to fail’ (short):
    http://www.ritholtz.com/blog/2009/10/why-obama-cannot-reform-wall-street/

    Here is a rather long rebuttal to that position; but it is a must read (long):
    http://www.nakedcapitalism.com/2009/10/volcker-glass-steagall-and-the-real-tbtf-problem.html

  International War Against Radical Islam

The Market
    
    Technical

    The Averages (DJIA 10041, S&P 1091) remain within their up trend off the March low (9705-11606, 1057-1295).  Volume was weak again; and the VIX reversed Monday’s action--in which it rose on an up day in the Market--by declining on a down day.  I am not sure what to make of these two days of unusual behavior; it may be nothing more than ‘noise’.  To me as long as it remains in a down trend that is a positive for the Market.

    Thoughts from TraderFeed:
    http://traderfeed.blogspot.com/2009/10/morning-briefing-for-october-21st-some.html

    Is current contrary analysis a positive indicator (short):
    http://www.marketwatch.com/story/contrarian-analysis-still-positive-for-stocks-2009-10-20

   Fundamental
   
     Headlines

    Yesterday’s revenue scoreboard: Biogen beat both EPS and revenue estimates, as did Caterpillar, as did Dupont, as did Pfizer, as did United Technologies, as did Coach, as did UnitedHealth, as did Yahoo, as did SanDisk, as did Gilead Sciences.  On the other hand, these companies beat earnings but not sales: Coca Cola, Lockheed Martin and Sherwin Williams.

    As of the close yesterday, of the companies reporting, 79% have beaten their earnings estimates and 65% have beaten their revenue expectations.  So to date clearly we are getting the improvement in top line growth that is anticipated in the revenues-are-key thesis; and yesterday’s Market performance notwithstanding, investors are responding positively to those better sales reports--the other tenet of the revenues-are-key thesis.

    That said, can we simply ignore yesterday’s fall in the face of the really good EPS and revenue reports listed in top paragraph?  For one day, sure.  Particularly when there were other factors weighing on stock prices: (1) the housing starts number was not particularly good--it has been flat for four months now; and many investors believe that there will be no economic recovery without a rebound in this sector.  (2)  plus the dollar rallied; and recently there has been a pretty firm inverse relationship between the dollar and stock prices.

However, I don’t think that the housing market is all that important to the US economic recovery and a one day breather in the relentless savaging of the buck is not a trend.  So for the moment, I am not getting bent out of shape over one day’s contrary pin action.  Nevertheless, it does leave enough uncertainty over the issue (will better than expected revenues continue to drive stock prices higher) to keep us from getting complacent.
 
   





Posted 10-21-2009 8:26 AM by Steve Cook
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