It's all about earnings
Steve Cook on Disciplined Investing

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Have You Seen This?

News

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Have You Seen This?

The Market
    
    Technical

    The indices (DJIA 11143, S&P 1184) had a generally good day finishing well within their current trading range (9645-11257, 1042-1220) as well as my hypothetical re-set up trend off the March 2009 low (10364-13609, 1080-1484).  I remain focused on the upper boundary of the current trading range (11257, 1220), the former upper boundary of the same trading range (10725, 1149) and the hypothetical lower boundary of the above mentioned up trend (10364-1080) as indicators of Market direction.

    Volume was good though not quite as strong as Thursday and Friday last week; breadth improved; and the VIX declined modestly, leaving it in a down trend.

    Bottom line: I made two observations last week that constitute the most operative elements of the technical picture at this moment: (1) there is considerable distance between current prices and those boundaries I list above; so there is no immediate call to action and (2) the prices of some of our holdings are nearing their Sell Half Ranges; if the pin action continues to push prices up, our Portfolios will act on our Sell Half Discipline.

   Fundamental
     
     Headlines

    This week marks the beginning of the really ‘meaty’ part of the third quarter earnings season.  So it is likely that profit reports will command the greater part of investor attention.  Indeed after a very quick sell off at the opening on the poor industrial production number (see below), Citicorp reported its earnings (better than expected) and prices turned to the up side and never looked back.  Further, last night Apple and IBM reported and gave some disappointing guidance.  Their stocks sold off in after hours trading and appear to be setting the tone for a lower opening this morning.

    One other item worth noting: Bank of America said that its foreclosure problem is a matter of correcting the paperwork on a small number of mortgages and that it would resume foreclosures in a couple of weeks.  Guys a lot smarter than me and who have a much better working knowledge of this problem say, no way Melvin.  I noted last week that the range of opinions among experts on the magnitude of foreclosure-gate was too disparate to be able to draw any kind of reasonable conclusion.  The point being that I don’t we take B of A at its word and we wait for more information before assuming that this dilemma goes away soon.
 
    Bottom line: my cognitive dissonance isn’t going away.  The Market continues to act great in the face of so-so news.  My opinion continues to be that the only (fundamental) thing that justifies current Market enthusiasm is a revolution on November 2; and I don’t see it.

    This is a little scary (short):
    http://www.zerohedge.com/article/visualizing-pomo-market-how-fed-added-400-points-sp

Economics

   This Week’s Data

    September industrial production was reported down 0.2% versus expectations of up 0.2%; capacity utilization came in at 74.7 versus estimates of 74.8.
    http://scottgrannis.blogspot.com/2010/10/industrial-production-does-not-support.html

    September housing starts rose 0.3% versus expectations of a 0.3% decline; however, building permits fell 5.6% versus estimates of an increase of 1.2%.
    http://www.calculatedriskblog.com/2010/10/housing-starts-increase-in-september.html

   Other

    More abuses of the banking industry (short):
    http://www.ritholtz.com/blog/2010/10/shared-profits-not-losses/

    The latest from John Mauldin (long):
    http://www.ritholtz.com/blog/2010/10/the-subprime-debacle-act-2/

    More on the austerity problems in France (medium):
    http://www.zerohedge.com/article/french-strikes-continue-country-runs-out-gas

Politics

  Domestic

My favorite liberal blogger updates his thoughts on Obama (medium):
http://www.newsweek.com/blogs/kausfiles/2010/10/17/obama-clings-again-blames-scared-voters.html

  International War Against Radical Islam


    Islam and free speech (long):
    http://www.nationalreview.com/articles/249981/wilders-west-andrew-c-mccarthy









Posted 10-19-2010 8:19 AM by Steve Cook