A View from a Temporary Top

 | Apr 25, 2014 | 2:00 PM EDT
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With the earnings season well under way and about half the S&P 500 companies having reported, the results are better than most would have predicted. Almost 70% of the companies have met or exceeded earnings per share estimates but there have been many disappointments on revenue numbers.

It's always good to know that companies can reward their shareholders with rising dividends and earnings numbers through cost cutting and share buyback programs in tough environments. But missing revenue targets is viewed as the chink in the armor.

I don't see it that way. Remember, these companies are not losing revenue. They just aren't reaching the revenue growth targets that analysts and the companies themselves thought they would. Let's understand most of these are mature companies and it's more difficult for mature companies to grow revenue numbers by high percentages in an economy that is still challenged with high "real" unemployment. It is a testament to the leadership within the corporations that year in and year out (in most cases) they find ways to return value to shareholders.

On April 4 the S&P reached an all-time high of $1894 only to fall to $1815 by April 11. When the earnings rolled in better than expected (especially with all the talk about how the harsh winter might be a negative factor), the S&P recovered to $1884 by April 22. It did, however, fail to test the highs, even with some extremely strong reports from Facebook (FB), Apple (AAPL), Netflix (NFLX) and Caterpillar (CAT).

There also are some moves in commodities that might compete for some money that has been parked in equities and is looking for higher returns. With the talk about droughts threatening the wheat crop, we have seen volatile moves in the grains market.

Copper, which had been beaten down on demand concerns for the last month to levels that it hadn't seen in three years, has had a 12% bounce from those lows. On Thursday, both gold and silver had outside days on the charts that seem to signal an upside move is possible (although the move could be fake and built on fears out of the Ukraine).The dollar has remained weak and the yield on the 30-year bond has a chance to break lower (bonds higher).

At the time of this writing the S&P futures are down five handles to $1868 and I think if you are a trader, you should be looking to sell any move up to $1878. We are going to be range bound between $1805 and $1890 for a while. If you are an investor (which I put myself in that category) than maybe you can best protect yourself with some option strategies. But if you are a short term trader, I think we have reached a trading top that you could take advantage of.

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