Will Intel Be the Downside Catalyst?
By Rev Shark
RealMoney.com Contributor
1/14/2011 8:46 AM EST
To expect too much is to have a sentimental view of life, and this is a softness that ends in bitterness.
-- Flannery O'Connor
Earnings season is all about expectations. If they have been too high, we pay a price; if they have been too low, we celebrate.
Intel (INTC) earnings have always been a great indicator of overall expectations. Its numbers are almost always quite good, but the market's reaction varies widely. Once again, Intel reported a great quarter, but after a celebration last night, the action isn't nearly as peppy this morning.
This is nothing new. Intel has a history of producing "sell the news" reactions when the market is at highs. Conventional wisdom is that when the semiconductors are leaders, it is time to be extremely careful. The group is often the last one to lead, right before the market softens.
I don't want to be overly anticipatory and look for a major market turn here, but Intel earnings are a potential catalyst we have to be aware of. Even if INTC itself holds its gains, it can still cause a "sell the news" reaction in the broader market as earnings season continues.
JPMorgan (JPM) also reported numbers that were ahead of expectations, but it is trading down a few cents on the news. The big surprise on the earnings front is a preannouncement by Coinstar (CSTR) of poor numbers. It is being clobbered on the news and is spilling over to Netflix (NFLX) as well.
Another important piece of news overnight is that China's central bank raised its reserve requirements for the fourth time in the past two months. There are obvious concerns about inflation there, but China stocks have consistently shrugged off this tightening so far. There also is a higher level of hawkishness in Europe, but the U.S. seems quite sanguine about the prospects for inflation. But keep an eye on this one -- heightened inflation concerns in the U.S. would be a major headwind for equities.
Even though the market is slightly weak this morning, the recent uptrend has been so strong and so unrelenting that we'd be foolish to look for a sudden collapse. Markets that are this strong just don't fall apart easily. Generally a top is a process that requires some back-and-forth action over a period of time before dip-buyers start to lose their confidence. The first few dips are almost always bought by the folks who have been waiting endlessly for some sort of pullback. It is only after they find themselves trapped in an uncooperative market for a while that they lose confidence and create selling pressure.
We have a slight gap down to start the day, but dip-buyers have had an almost Pavlovian response to such things for quite a while. It has been a signal to immediately jump in, because we all know that this market just can't go down.
As I've mentioned, I've been finding it increasingly difficult to keep finding new buys as this market goes straight up day after day. I'm going to keep looking for setups and am unwilling to be an active short until we have some real price weakness.
Today will be a very good test of market character. If the "sell the news" reaction shows some vigor today, we will have to watch for that the theme to continue as earnings season continues. A little increase in volatility would go a long way in creating some new trading opportunities.
No positions.
December Industrial Production +0.8% vs +0.4% Briefing.com consensus, prior revised to +0.3% from +0.4%; Capacity Utilization 76.0% vs 75.5% Briefing.com consensus
January University of Michigan Confidence 76.0 vs 75.5 Briefing.com consensus, December 74.5
Briefingult väike apsakas. Michigani indeksi tegelik näit oodatust madalam:
January University of Michigan Sentiment- prelim 72.7 vs 75.5 Briefing.com consensus
January University of Michigan Sentiment- prelim 72.7 vs 75.5 Briefing.com consensus
Tänane CPI number meedias küll olulist tähelepanu ei pälvinud, kuid tegu oli siiski huvitava raportiga. Inflatsioon kasvab USAs üle ootuste kiiresti, aga samas kinnitas jaemüügi raport, et tarbimine on riigis endiselt tagasihoidlik. 0.5%line CPI näit ületas oodatud 0.4% ning novembrikuu 0.1% - ühtlasi on tegemist ka suurima kuise kasvuga 2009. aasta juunist saati. Näiteks mootorkütus kasvas detsembris koguni 8.5% ning energia kallines 4.6%. Y-o-y baasil tõusis kütuse hind 13.9%. Imekombel kasvasid toiduhinnad aga vaid 0.1%. Tulevatel kuudel on aga oodata tugevat trendi muutumist, kui üldine hinnakasv jõuab ka toidukaupadeni. Nagu paar nädalat tagasi sai juba mainitud, siis meedias reklaamitud rekordiline jõuluhooaeg valmistas ühe suure pettumuse – jaemüük kasvas 0.6% vs oodatud 0.8% asemel. Alloleval graafikul on ära toodud USA 10-aastase võlakirja ja 10-aastase TIPSi spread, mis näitab sisuliselt turu inflatsiooniootust (ehk järgmise 10 aasta oodatav keskmine inflatsioonimäär on täna ca 2.28%). Tänase raporti taustal ei ole põhjust „karta,“ et trend muutuma peaks. "Prindime majanduse raskustest välja" mentaliteedil on paraku tagajärjed.
The Fed purchased $7.31 bln of 2015/2016 maturities through Permanent Open Market Operations as dealers looked to put back $24.89 bln
Natl Bank of Greece: Headlines crossing that Fitch has cut Greece's rating to junk, outlook negative
COCO täna paraku oluliselt soodsamat sisenemisvõimalust avanemisel ei pakkunud kui eelturul, kus positsiooni sai soetada ka $5 alt. Peale avanemist käis aktsia ära ka üle $5,20 taseme ning hetkel kaupleb $5,13 juures, ca 9% plusspoolel. Nagu hommikul ütlesin võiks COCO olla väärt hoidmist paari nädala perspektiivis ja jään sellele siis silma peal hoidma ning paari nädala pärast teen ka väikese tagasivaate.
