Sunday, January 10, 2010
ACCESSIBLE TERRAIN
EARNINGS SEASON
So the the quarterly Wall Street ritual of “earnings season” begins in earnest Monday with AA releasing earnings after the close. The next few weeks can be a volitile time in the market as leadership stocks report and others within like sectors respond in kind. Take, for instance, our discussion last week about Schnitzer Steel (SCHN) and its possible effect on the steel sector. SCHN reported after the close Thursday and surged Friday. The steel sector stocks (CLF, X, ATI, AKS) responded in kind. Keep in mind that any trades entered over the next few weeks can be affected by the earnings of a company within the same sector. As usual we will trade the earnings expectation and not the result. I have included an earnings calendar for the upcoming week in our ON THE RADAR section with each company’s sector included for your reference. We have several possible earnings plays on stocks reporting over the next few weeks and will be including additional commentary on these as well. In the meantime, our current plays continue to work well even as we decided to get out of one with a small loss. No trading methodology ever makes money 100% of the time. Discipline in the face of battle, however, always works!
THE JOBS REPORT AND EXPECTATIONS
Unless you live in a cave with the GEICO guys, you know the jobs report was Friday. Not going to rehash old news here but the headlines prove a great point about human nature and the stock market. One of the headlines over the weekend in a major financial newspaper was that employers “unexpectedly” shed 85,000 jobs last month. The 85,000 “unexpected” job losses were unexpected because of what? The consensus before the report was for a possible rise in jobs or, at best, a flat number. The consensus was the reason for the unexpected result, not the number itself. What if the consensus was for 100,000 job losses and an increase in the unemployment rate? Would the market be “highly surprised” and “exhuburant” over the lower number and a steady unemployment rate? The market sets itself up for its own reaction by attempting to predict its own future. The same goes for earnings, and the weekly oil report, and any other of a number of economic reports that can move the market. What a nice little child’s game the market plays! Human nature is human nature I suppose, whether on the Street or in the alley.
BATTLE SUMMARY
BATTLES WON (PROFIT TARGETS HIT): NONE
BATTLES LOST (LOSS TARGETS HIT): ADBE
SURRENDERED (TRAILING STOP HIT): NONE
SEVEN (7) NEW ENTRIES TODAY.