WALL STREET 19/10/2012 >>> Weak Tech, Soild Housing; Stocks End Day On Sour Note

Google & Microsoft Miscued;
Tech Sector Drags Down DJIA
The Dow traded in positive territory several times today, but headed south after lunchtime, finding its first loss in the past five sessions.

The Dow Jones Industrial Average (DJIA – 13,548.94) spent time on both sides of breakeven today, seeing an intraday high of 13,588.73, and a session low of 13,510.93. But by the time the dust settled, the Dow found itself down 8.06 points, or 0.06%. American Express Company's (NYSE:AXP) earnings-related deficit of nearly 3% headed the index's 11 underperforming issues, while The Travelers Companies, Inc. (NYSE:TRV) gained 3.6% on a better-than-expected quarterly report, pacing the 18 winning blue chips. The Procter & Gamble Company (NYSE:PG) remained unchanged.

Both the S&P 500 Index (SPX – 1,457.34) and Nasdaq Composite (COMP – 3,072.87)turned lower today, ending a their three-session uptrend. The SPX slipped 3.57 points, or 0.24%, while the COMP retreated 31.10 points, or 1%. This worst performance of three benchmarks was highlighted by Google Inc's (NASDAQ:GOOG) & Microsoft Corps (MSFT) "premature" earnings release.

 

The CBOE Market Volatility Index (VIX – 15.03) aka Fear Index edged south by 0.3%, but bounced from its session low of 14.68.

 

ANALYSTS' QUOTES:

 

"Say what you want about technology lagging today. The reality is, tech has performed poorly for nearly a month now. What stood out to me is that housing once again bucked the trend and had a good day. Some wise advice that is easier said than done is to play the trends until they don't work anymore."

 

 

 

 

 

 

 

 

 

 

 

 

"My friends, tech is going down and housing is going up. I have no clue how that will end, but it's reality. And as traders, it's our job to trade the major trends." 

 

 

 

 

“As we saw in Google’s report, there are lots of high expectations in some of these widely held names, and when they don’t deliver, they can get hit pretty hard.” 

 

“The PC market was challenged this quarter. In addition to a tough economic environment and competitive pressures, OEMs [original equipment manufacturers] drew down their Windows 7 inventory as they began to transition to Windows 8.”

 

”The clear driver on the quarter was PCs, shipments of which declined between 8% and 9%. This hurt Windows as well as Microsoft business division revenue.”

 

 

GOODLUCK & HAPPY TRADING

WALL STREET >>> Critical Earnings Season Begins Tomorrow with Alcoa

A strong round of corporate earnings could help to offset last Friday's jobs disappointment

 

Alcoa (AA) kicks off first-quarter earnings for 2012 after tomorrow night's close. Historically, Alcoa's report has been very predictive for both corporate earnings and the subsequent price action within the equity market. While some say that too much emphasis is placed upon AA's actual report, it is undeniable that major corporate earnings numbers will have a huge impact upon the market's price action going forward.

 

Since the end of 2011, analysts' earnings estimates have been revised dramatically higher. Lowered expectations have given way to an increasing level of optimism, both on the macro and micro fronts. This could be a function of the increasingly positive economic data that has surfaced over the past few months. Of all the sectors within the market, financials have seen the most drastic upward revisions (currently at their highest level since 2008). Since the market bottom in March 2009, bears have held onto the mantra that the market cannot rally without participation from financials. Up until the beginning of this year, the bounce in financial stocks had been fairly modest, especially given the dramatic sell-off that they experienced during the crisis of 2008.

However, the Financial Select Sector SPDR Fund (XLF) is up dramatically this year, outpacing the S&P 500 Index (SPX) by over 7%. Since these stocks are now performing strongly, could continued outperformance by financials be the next catalyst to take us even higher?

Historically, upward earnings revisions have preceded very strong periods within equity markets, as evidenced by the accompanying Bespoke data (above charts). After last Friday's disappointing jobs number, a strong earnings season could be just what the doctor ordered to cause sideline money to come back into the market, driving it to new highs. All eyes will surely be on the upcoming data, which is now of paramount importance given the recently heightened expectations. 

Bottomline

Pre-market Dow Futures give a good indication of market traders expectations towards upcoming season's corporate financial reports.

Technical analysis is not a forecast of the future. It is a timing tool.

At its core, it is a visual representation of the market’s underlying psychology and, when considered against the broader geo-political landscape, is adept at signaling the prevailing mindset of investors.

I used technical analysis to time my exit from the market after it broke a key resistance level I was monitoring in late June. Without this cold, objective tool I would have been a slave to emotion and would have lost big.

With it, I was able to objectively evaluate the prevaling market psychology and was able to exit my positions.

It's not tea leaves. It works.That’s why its in such widespread use.

It separates the wheat from the chaff.

HAPPY TRENDING!!!