The Day Ahead: A Real Head Scratcher

 | Jul 15, 2013 | 8:00 AM EDT
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The bottom line is that water-boarding seems like an intense form of human torture. This is definitely not the proper forum to discuss whether the technique is right or wrong. But, that feeling of being subjected to something un-pleasurable lies firmly ahead this week.

Earnings season picks up, Bernanke speaks on two days and who knows what Fed model lover will appear on the stage to stoke fear or share propaganda to the markets.

Truthfully, I have zero sense on where the market is headed. The past week or so has left me at wit's end regarding the entire process of investment selection using tried and true disciplines. It all sucks as there is always this overriding concern that the aura as it pertains to the liquidity that is lifting all ships will end abruptly -- and with it bring financial pain to trading accounts across Mother Earth.

Here are my financial webshow pitches entering the week.

Title: #Overboughtnado

Tease: Sort of like #Sharknado, except it's a storm that inflicts pain on stock prices.

 One has to wonder if we are nearing short-term overbought conditions (especially considering the holes inside of JP Morgan's (JPM) and Wells Fargo's (WFC) earnings, and the bomb that was the UPS (UPS) pre-announcement). Here are three stats that scream overbought:

  • The VIX Index has declined for seven straight days, its largest stretch of losses since October 2011.
  • The S&P 500 has risen 6.8% from the June 24 bottom, the quickest pace since December 2011.
  • The financials advanced on Friday in the face of the aforementioned so-so earnings from the two industry heavyweights. This is an indication people are buying blind instead of drilling deeper into the fundamental risks. Thank you, Federal Reserve for that one.

 Title: Earnings!

Tease: They used to matter.

Quite disturbing to watch stocks rip in the face of a bellwether such as UPS laying a quarterly egg. The egg wasn't a little rotten -- oh no -- this puppy was left baking in the 95 degree sun for the past 90 days. Do any economic bellwethers even exist anymore? Moreover, the definition of economic bellwether has become tainted due to Fed policy.

Back in the Alan Greenspan days, and when I was a wee lad in financial services, it was common practice to enact positions in comparable companies/competitors based on the performance, or lack thereof, from an industry heavyweight. So much for all those years of studying; we are being retrained on the fly.


CSX Corp. (CSX), Marten Transport (MRTN), Packaging Corp. (PKG), Textron (TXT), Danaher Corp. (DHR), Johnson Controls (JCI), Kansas City Southern (KSU): This will be where to look for confirmation of the global economic dread implied by fine folks at UPS. I am studying industrials in particular following negative pre-announcements in mid-June:. I am very curious to learn on post quarter trends and if we land similar negative stock reactions, as was the case of UPS, should guidance severely disappoint. Fed policy versus economic reality...

IBM (IBM), Intel (INTC), SanDisk (SNDK), and Advanced Micro Devices (AMD): Goldman's (GS) recent downgrade on IBM caught enough coverage to heighten awareness before the earnings report. With the Philadelphia Semiconductor Index (SOX) and Nasdaq outperforming the S&P 500 in the past month, be on lookout for selling on positive news (shouldn't the news be positive if the stocks are outperforming, or is it solely Fed crack induce). Conversely, the economy did moderate from 1Q to 2Q, the degree to which this impacted new orders/outlooks intrigues this guy's mind.

 Source: Yahoo! Finance

 Sherwin- Williams (SHW) and PPG Industries (PPG): Normally not market-moving earnings reports. Key word there is normally. These are must analyze reports to see if comments on if higher interest rates have impacted demand towards the winding down of the second quarter. If there is an indication of slowing demand, the bullishness on second derivative housing recovery names (Home Depot (HD), etc.) that has materialized will likely fade.



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