Earnings Season and Squawking Bears

February 2, 2010

'This could be the greatest night of our lives, but you're going to let it be the worst.' (Line from John Belushi in Animal House)

Earnings Season? Is it Really?

Just getting started with earnings season, and instead of the powerful forces behind the bull curtain, all we see is a disappointing reaction. I suppose we can go back to RIMM last month for clues, where they had posted robust numbers but ever since has gotten pasted. INTC and IBM, two tech bellwethers...have beaten numbers but their stocks have suffered. Perhaps the bullish fervor is too much to overcome, and while there are a handful of good responses (CREE, NFLX for a few), the reactions have not been too good. This week is a robust schedule for releases, and with low volatility we could see some good action. Or, as Belushi says above...The big news of the week is about jobs, or a lack thereof.

Steady as She Goes

You may have noticed lately some extremely volatile days. Frankly the volatility is not that high, and is not really matching the moves. What I mean is the lack of followthrough. Last week, seemed like the markets were going off a cliff...TWICE. Tuesday and Friday were as nasty as can be. Yet, the following day, all was good. Can we expect this action to continue? Well...we play the patterns until they don't happen any longer....so, there is your answer. Since the start of the year, the SPX has tickled new highs a few times, but is down 3% or so. The other indices are down as well, so if you can stomach these blasts up and down, then you're fine.

Squawking Bears Mean a Bigger Correction is in the Future

Bears all around now, I can hear 'em and smell 'em. They have been literally clobbered for months, not much to show for any returns relative to the markets. I can hear it now: 'oh, you just wait...it's coming, the big crash...and you bulls will get blasted'. Been there, done that...so spare me. Oh, sure we'll correct...but not on anyone's clock, and certainly not the bears. With a VIX around 23%, there is not much to the big 'crash' argument, now is there? The VIX blasted higher recently but has come off. The market is complacent...sure, that's true. However, the action lately has been more about rotation, and while bonds have been doing well of late, we know that lower rates are positive for equities in the long run. So, enjoy the run while it lasts, as the inevitable correction will come about when you least expect it. Just watch and listen the markets.

VIX Daily Chart
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