All Eyes On Earnings

Monday, April 4, 2011
Stock Market Commentary:

Stocks opened higher on Monday as the euro rallied and crude oil topped $108/barrel. It was encouraging to see a slew of leading stocks and the benchmark S&P 500, Dow Jones Industrial Average, Nasdaq composite, and small cap Russell 2000 index all close and stay above their respective 50 DMA lines in late March. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. However, the correction was short lived when a new rally was confirmed on Thursday March 24, 2011′s healthy action. Since then, the action remains healthy which suggests the bulls are back in control of this market.

Stocks Rally As Q2 Begins: All Eyes On Earnings

Stocks opened higher on Monday as traders await the official start to Q1 earnings season. We would be remiss not to note that earnings since the March 2009 low have been very strong. The latest data shows that S&P 500 are on track to surpass the 2007 peak of $90 a share in the third quarter after surging from $7 in March 2009. If that were to occur, than this would be the fastest recovery since at least 1900, according to data from Bloomberg, Standard & Poor’s, and Yale University’s Robert Shiller. The data shows that the difference between projected 12-month earnings and average earnings over the last 10 years is set to widen the most since 1951! This bodes well for the current bull market and Q1 earnings season. Keep in mind, that in addition to focusing on the actual results, we like to focus on how the market and each individual stock reacts to its earnings for a pure read on what the market thinks of the data.

Market Action-Confirmed Uptrend

The market is back in a confirmed uptrend after a modest (and healthy) -6% correction from its post-recovery highs. We find it very bullish to see the mid cap S&P 400 index hit a fresh all time high and the small cap Russell 2000 index flirt with its all time high. in addition, the Dow Jones Industrial Average vaulted to a fresh post-recovery high and the S&P 500 and Nasdaq composite are just shy of fresh 2011 highs! Finally, we are very happy to see a slew of high ranked stocks trigger fresh technical buy signals in recent weeks which suggests higher, not lower prices lie ahead. If you are looking for specific help navigating this market, please contact us for more information.


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