Earnings and Economic Reports Come Piling In

The perfect earnings setup for the bulls played out. Three Dow companies and the biggest Chip company that were expected to do better than their peers had earnings that beat lowered expectations. INTC started it off yesterday after the close, and JPM, WFC, and KO put the maraschino cherry on top of the whipped cream by beating lowered expectations today. Here are a couple of things to keep in mind: JPM and WFC were the two most responsible National Banks during the real estate bubble. KO is not a good economic barometer. And INTC was taking market share away from AMD, and only guided up expectations slightly. So those four companies should have beat lowered expectations.

The economic numbers were not quite as glittery, but OK. Housing Starts and Building Permits came in worse than expected, and at a 17 year low. CPI came out in-line with expectations (which means that producers continue to try to hold back price increases to consumers). And Industrial Production beat expectations, while Capacity Utilization missed a little.

My thoughts on the market are that we may get a bounce short term, but I still don't see the catalysts to change the intermediate term trend. I don't think we have a broad enough cross-section of corporate earnings to change the picture just yet, but we shall see.....

I may play the Q's (INTC), and the DIA (JPM, KO, and INTC) for quickish call plays today, maybe.....And I will watch my bounce list from yesterday.

RIG is a gap and fade right out of the gate, so I got rid of it. I lost 93 cents on a half sized position on RIG, so a minimal loss. The Energy play is starting to get fairly old on the current short term swing, and traders faded the gap immediately. This tells me that a bunch of money put in market sell-at-open orders, which I don't want to be a partaker of. Also, INTC gapped right to resistance, just as I said it would yesterday, so traders are fading the stock right now. I will wait for a pullback before playing the DIA or Q's, if I do play them.

The SPY is right at the gap at 135.00, the DIA at the gap at 125.00, and the Q's sitting just below the gap at 45.00. Me and MC Hammer have one thing in common right now, I can't touch this. We may get a Momentum Day, but I just don't think so.....Call it a hunch based on too many earnings to come, and only decent to soft economic reports. I think this will at least swing back a little from the gaps. I may be wrong, but I'm not treating this as a chaser day, and I'm still a nibbler in this market. I haven't dramatically changed my posture.

I nibbled on STLD calls, which may confirm a bounce today. The steels look strong, so I'll keep an eye over there. Even though X and AKS are stronger stocks, STLD has more buying pressure this morning, but I'll watch all three. Almost all the stuff I was watching gapped away this morning, and frankly, I would be scaling out of a little of it right now, if I owned it. So I will pick and peck here and there on swing backs, but I'm not chasing. MRK is rolling over, and APOL continues its incredibly reluctant fade, with another drop and pop. I dumped the last of my APOL puts and locked down a 33% gain on the total trade. APOL has way too much goofiness on the fade. I don't know who's buying it on the rollover. But if the buyers are short-covering, then they are being a little too weird about it. The term spastic colon comes to mind. If they're covering they should just let it go and then cover, but someone over there has a really itchy trigger finger, so I'm taking my money and walking.

I nibbled a little on DIA calls just in case this is a Momentum Chaser Day. I will nibble on some Q's in the upper 44's as well. Only small positions, but I want to be a part of this move if we are just going to dog-pile all the way into the close.

I sold my MEE calls for a 25% profit just ahead of the Oil Inventory Report, which is good enough for a 2-day play.

The oil inventory report must have come in strong, because Energy is spiking right now. I may look for another trade over there now. I did buy back into MEE calls, and I bought some SPWR calls on the intra-day Symmetrical Triangle. Both are profitable already.

I sold the SPWR for a 13% gain in 12 minutes. MEE is running hard, and I'm up 28% in 2 hours. I bought some SPY calls to go along with my DIA. I added to STLD, and I nibbled on AKS and X calls. I will sell the AKS and X by the end of the day if I can, but those are small positions right now anyway. STLD is a full position and so is MEE.

I got tired of fussing with the MRK puts, even though it has rolled over. So I sold it for a 10% gain and walked away. It may roll down a couple more dollars, but I have too much to watch, and I'm focused in other areas now. I also goofed around with a RIG intra-day trade, but only made 15 cents, which offset the 93 cent loss earlier, and gave me a net loss of 78 cents on a half sized position. RIG has been my only losing trade since April 9th.

I took profits on part of MEE for a 30% gain intra-day on the positions I sold. I am still holding 6 of my 10 contracts. I sold all of X for a 14% gain intra-day. I still have DIA, SPY, MEE, AKS, and STLD calls.

Chemicals were the biggest movers today after Goldman Sachs blew some sunshine on the industry. Some chips that I talked about yesterday, like KLAC and SNDK (confirmed bounce), moved up on the INTC news, just as I speculated. By the way, for any stock traders who like cheap stocks (which I don't trade), here are some cheap Chips that bounced out of Bull Flags: KLIC, MIPS, and MU. Also, JPM and WFC gave Financials a tailwind, but that should have been expected since those were the two most responsible banks during the subprime mess. And the Dow moved on the positive reports from INTC, JPM, and KO.

On the economic front, well.....it was OK. Nothing to shout about, and maybe some things to be cautious about. The positive was Industrial Production rose just a little. The ripples around a potential iceberg were CPI reporting in-line with expectations. And the negative was the Housing data, which showed the lowest level of Housing Starts and Building Permits since 1991. In addition, Oil hit another all-time high of $115.07 intra-day. I'm not convinced we have an all clear signal on the economic front. But we will know what Big Money thinks if the Dow breaks out above 12,750. And you know by now that you go with price over any other information.

You can pretty much throw a dart at the Bullish Watchlist from Saturday to get an idea who moved today. As usual, Commodity and Energy stocks led the way, especially Commodity stocks. Chips, Tech, and Financials also contributed to the move. Gold is off the Bearish list. APOL is off the bearish list for now. RTN is off the Bearish list.

Here are some stocks that may be early enough in a swing to still play: QQQQ, FWLT, STLD, ANR, SUN (broke out of Symmetrical Triangle with volume), ATI, IR, (maybe PCU and FCX), (maybe DE, PH, and CAT), (maybe SLB and APC), RIMM, (maybe DOW), (maybe some Financials: GS, AIG, ICE, MET, and NYX), (maybe AMZN), AMX, and ERTS.

Only 26 out of 309 stocks in my Universe moved down today. I am very selective about my Bearish Watchlist right now. MRK did continue to roll over.

IBM beat earnings and raised guidance after the close. The stock is up about 3% after-hours. IBM is probably the biggest focus for traders going in to tomorrow's trading. However, EBAY and GILD tonight, and MER, PFE, and LUV will carry some interest as well. In steel, NUE and RS will be important earnings reports before the open tomorrow. I will be ready to jettison my steel calls if those companies dump the sector.

On the economic front, Initial Jobless Claims will hold some interest, and Leading Indicators and Philly Fed will probably take a back seat.

Barring catastrophic numbers from one of the above, IBM and Initial Claims should be the focus, and so far we have 1 out of 2 going strongly bullish. I would say that the probability is moving towards a bump up tomorrow, maybe a gap, and the move early in the day may finish out most of the current swing, because it will take the markets right into resistance areas. We are still Intermediate-Term Neutral, so a big move early in the day and I'm a seller, not a buyer. Until we break Intermediate-Term resistances, I am still playing shorter swings.

If you get bored tonight, here's a little ditty that's sure to get you square dancing a merry little jig. It's from Old-School Market Wizard Ed Seykota. He is one of my favorite wizards when it comes to focusing on PRICE ANALYSIS and ignoring fundamentals. In fact, he coined a great trading term about price vs. fundamentals for trend traders. When asked if he used fundamentals to pick stocks, he replied, don't you mean "funny-mentals." Still one of my favorite terms.....

Here he is in all his splendor:

http://www.seykota.com/tribe/essentials/vimeo.htm

you just can't argue with a guy who plays the banjo, didn't Steve Martin set the standard?