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Trading Now

Saturday, July 10, 2010

A Look at the Past and The Coming Week

*the markets rallied this week after their shallacking of the previous two weeks but still couldn't get the volume to move up through some key resistance levels. But I have faith that the PPT will do their duty by getting the market to rally close to 11,000 yet again and maybe back up through the 200 day moving average. Only this time, the banks earnings that will come from currency trades, bond and stock trading (shorting the Euro helped jack the Dollar and shorting the stock and bond markets) will be seen right through by savvy investors and truthtelling analysts. This means again that you should buy now and sell into the earnings news.


*EARNINGS SEASON BEGINS MONDAY JULY 12: expect a stock market rally to at least 10,500 on crystal ball forecasting and better than expected earnings, AGAIN! Alcoa kicks off the season on Monday.
The big earnings on deck are Alcoa Inc. (NYSE: AA), CSX Corp. (NYSE: CSX), Intel Corp. (NASDAQ: INTC), YUM! Brands Inc. (NYSE: YUM), J.P. Morgan Chase & Co. (NYSE: JPM), Google Inc. (NASDAQ: GOOG), Advanced Micro Devices Inc. (NYSE: AMD), Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), and General Electric Co. (NYSE: GE). Read more: 24/7 Wall St. - Insightful Analysis and Commentary for U.S. and Global Equity Investors

The Past Week in Review

*in case you have been wondering as to why the stock market had an almost 15% retracement: BDI has been falling for months. This means there has been no industrial manufacturing around the world. The price to move iron ore has dropped precipitously. Keep an eye on this very important indicator.
09 July 2010
Baltic Dry Index (BDI) -38 1902

How is Spending Still Strong?
Since Lehman collapsed in September 2008, consumption has remained surprisingly strong in the face of high unemployment (thus lower wages), lower asset values (less ability to tap home or 401k for spending), and a collapse in consumer credit.
How? The government! Less taxes and higher transfer payments (i.e. unemployment / welfare benefits).

*this is a huge problem folks. Until this government starts creating jobs, once stimulus drys up and tax revenue has fallen off the cliff, our consumer fed decades economy will come to a screeching halt. Spending by the government and all fifty states has already dropped to meet a decrease in tax revenue, but public employees and the greedy do nothings in Congress are still a drag on the economy. The mistake thats being made is raising taxes when no one has any money. Thats always sound isn't it? IJIOTS! You never see them raise taxes when things are good. Thats why we will NEVER fix our problems. Myopic Bubble heads.

A Worried Federal Reserve
Bernanke is considering buying up more MBS due to deflationary risks and a slow moving housing market recovery. I have said for two years now that 2011 is when house prices will bottom out and that may be the time to start buying. I make this presumption based on simple economics: consumers have no jobs and the jobs they do have will pay lower wages harking back to the 90's and in some cases as far back as 70's wages. Therefore, the inflationary prices of the housing market over the past 15 years are not sustainable and no one in their right cotton picking mind will get themselves into an exotic mortgage EVER again. So banks will continue to foreclose and suffer huge losses from their phony fee induced mortgage and asset backed securities markets. (I cannot find the quotes from Helicopter Ben so take it as a grain of salt if you wish).

*when Meredith Whitney talks, we all should listen. Meredith downgraded GS to a sell at $187. Dumb blonde right?
Meredith Whitney says GS and MS will see a drop in earnings.
Meredith Whitney Cuts Goldman Sachs (GS), Morgan Stanley (MS) Estimates
Banking analyst Meredith Whitney on Thursday cut her earnings estimates for Wall Street banks Goldman Sachs (GS) and Morgan Stanley (MS), in the days before the two are set to report earnings.
Whitney, head of the Meredith Whitney Advisory Group, lowered her estimate for Goldman’s Q2 EPS to $1.70 from her previous estimate of $4.75. She also cut her full-year estimate for Goldman for fiscal 2010 from $20.00 to $15.70. The Street is looking for 2010 EPS of $16.76
Morgan Stanley’s projection for 2010 were cut down to $0.40 EPS for the quarter (current Thomson Reuters (TRI) consensus is $0.50).
Goldman Sachs shares lost $1.17, or 1.19%, to $134.15 while Morgan Stanley rose 6 cents, or 0.25%, to $24.01 in afternoon action Thursday.

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